r  HB 

SSI 

I  .Mb 


UC-NRLF 


1 


# 


LIBRARY 

OF  THE 

University  of  California. 

RECEIVED    BY   EXCHANGE 


Class 


The  Natural   Rate  of 
Interest 

by 
Joseph  Massie 


A  REPRINT  OF  ECONOMIC  TRACTS 

Edited  by 

Jacob  H.  Hollander,  Ph.  D, 

Professor   of  Political    Economy 

Johns  Hopkins  University 


A   Reprint  of  Economic  Tracts 

Edited  by 

JACOB  H.  HOLLANDER,  Ph.  D. 

Professor  of  Political  Economy 

Johns  Hopkins  University 


Joseph  Massie 


The  Natural  Rate  of  Interest 
1750 


\\^x> 


Copyrighted  1912,  by 
THE  JOHNS  HOPKINS  PRESS 


Z^t  £or&  (^afftmorc  (prcee 

BALTIMORE,    MD.,    U.    S.    A. 


INTEODUCTION 

The  circumstances  of  Joseph  Massie's  life  are  hidden  in  the 
same  irritating  obscurity^  that  enshrouds  other  notable  English 
economic  writers — Vanderlint,  Harris — of  the  middle  eighteenth 
century.  We  know  only  of  his  literary  productivity  in  the  period 
from  1750  to  1765,  and  of  his  death — the  latter  recorded  in  a  bare 
note  in  the  Gentleman's  Magazine:"  "  November,  [1784].  In  Hol- 
bourn,  Mr.  Joseph  Massie,  well  known  for  his  political  writings." 
Some  of  his  tracts  are  inscribed  to  statesmen  of  the  period 
in  the  deferential  manner  that  suggests  the  favor-seeking  pamph- 
leteer rather  than  the  detached  philosopher,^  and  this  impression 
is  confirmed  by  the  infrequent  mention  of  his  writings  or  opinions 
in  contemporary  economic  literature. 

As  a  matter  of  fact,  it  is  as  bibliographer  rather  than  as  author 
that  Massie  figures  largest  in  the  history  of  economic  thought. 
The  "  Fifteen  Hundred,  or  more.  Books  and  Pamphlets  "  concern- 
ing "  the  Commerce,  Coin,  and  Colonies  of  Great  Britain  "  which 
he  had  been  "  above  Twelve  Years  in  making " — though  he 
"  resided  in  London,  and  was  not  sparing  of  either  Time  or  Money 
to  enlarge  it "  * — were  sold  in  1760,  and  thereafter  dispersed,  lost 
or  hidden — how  and  in  what  manner  we  have  no  knowledge.  The 
only  clue  is  Massie's  own  brief  memorandum:  °  "  Nov^  1760.  Sold 
the  whole  Collection  Excepting  those  under  Five  Heads — Viz — 
Duplicates — Tables — Abstract  of  Laws — Single  Acts — Treaties." 

But  Massie  left  a  monument  to  his  zeal  in  an  admirably  com- 
piled finding-list  which  he  continued  to  revise  and  extend  even 
after  he  had  disposed  of  the  actual  collection,  and  this  '  Alpha- 


^ "  It  is  surprising  that  the  personal  history  of  this  celebrated 
pamphleteer  is  unknown."  (Notes  and  Queries,  February  10, 
1866;  3d  series,  vol.  ix,  p.  119.) 

M784,  vol.  ii,  p.  876. 

'  The  copy  of  Massie's  "  Observations  upon  Mr.  Fauquier's  Es- 
say "  (London,  1756),  in  the  possession  of  the  present  writer  is 
a  presentation  copy  from  the  author  to  Lord  Townshend. 

'  Massie,  "  Representation  concerning  the  Knowledge  of  Com- 
merce as  a  National  Concern  "  (London,  1760),  pp.  1,  14. 

'  Upon  a  slip  attached  to  the  MS.  "  Index  "  ;  see  following  note. 


236755 


4  Introduction 

betical  and  Chronological  Index  of  Commercial  Books  and 
Pamphlets,' "  which  by  December,  1764  had  grown  to  2377  items, 
still  serves  as  the  most  helpful  guide  to  English  economic  litera- 
ture before  Adam  Smith. 

Massie's  interest  in  economic  literature  was  not,  however, 
merely  as  bibliophile  or  collector.  If  not  present  from  the  first, 
the  intention  soon  developed  of  utilizing  the  materials  that  he 
had  gathered  for  two  works,  a  "  commercial  history  of  Great 
Britain  "  and  a  treatise  upon  the  "  elements  of  commerce  illus- 
trated by  Applications."  In  1760  Massie  submitted  the  desira- 
bility of  their  preparation  to  the  commissioners  of  the  Treasury 
and  of  the  Exchequer  and  sought  public  employment  therefor.' 
Nothing  seems  to  have  come  of  the  proposal,  and  the  tract  in 
which  it  was  urged  is  still  of  interest  as  defining  a  present  need 
as  well  as  suggesting  an  early  and  vivid  conception  that  economic 
principles  must  rest  upon  economic  induction. 

The  energy  which  was  denied  its  larger  opportunity  found  vent 
in  a  series  of  pamphlets  and  tracts  written  year  after  year  from 
1750  to  1764  and  dealing  with  a  wide  range  of  contemporary 
issues  of  social  and  economic  import.*  Of  these  tracts  the  essay 
here  reprinted  is  the  earliest  and  one  of  the  most  important. 
More  than  any  other  It  is  concerned  with  an  economic  principle, 
marking  a  phase  in  Massie's  mental  history  before  the  stress  of 
contemporary  issues  had  made  him  pamphleteer  and  tract-writer. 
Whether  or  not  it  be  properly  entitled  to  the  distinction,  accorded 
it  by  many  critics  since  Roscher's  *  time,  of  refuting  the  direct 
association  of  the  rate  of  interest  with  the  amount  of  money, 
which  two  years  later  Hume  repeated  with  greater  simplicity  but 
no  more  force — Massie's  tract  surely  ranks  as  an  important  ele- 
ment in  the  pre-Smithian  discussion  of  profits,  and  neitJier  the 
doctrinal  historian  nor  the  theoretical  economist  may  properly 
neglect  its  content. 


"  British  Museum,  Lansdowne  1049;  lettered  "  Massie's  Catalogue 
of  Commercial  Tracts." 

^ "  Representation  concerning  the  Knowledge  of  Commerce," 
p.  25. 

*  For  an  apparently  complete  list,  see  Palgrave,  "  Dictionary  of 
Political  Economy,"  sub  Massie. 

""Principles  of  Political  Economy"  (Eng.  trans..  New  York. 
1878),  vol.  i,  p.  150  n. 


Introduction  5 

The  present  edition  is  a  reprint  of  Massie's  e&say  as  issued  in 
1750.^"  The  general  appearance  of  the  title  page  has  been 
preserved,  the  original  pagination  has  been  indicated  and  a  few 
notes  have  been  appended. 

Baxtimoke,  December,  1911. 


^"The  formal  collation  of  the  tract  is  as  follows:  Title,  1  1., 
preface,  [iii]-ly.  5-62,  8°.  As  early  as  1758  the  tract  was  out  of 
print  (Massie,  "  Farther  Observations  concerning  the  Foundling- 
Hospital"  (London,  1758). 


AN 

ESSAY 

ON  THE 

Governing   Causes 

OF  THE 

Natural   Rate 

OF 

INTEREST; 


WHEREIN 


The  Sentiments  of  Sir  William  Petty 
and  Mr.  LoCKE,  on  that  Head,  are  con- 
sidered. 


LONDON: 

Printed  for  W.  Owen,  at  Homer's  Head,  near 

remple  -Bar.  MDCCL. 

(Price    One    Shilling.  ) 


PREFACE. 


N  Inquiry  into  Opinions  which  have  been  gen- 
erally received  and  long  established,  is  an  Under- 
taking that  will  always  be  sure  to  meet  with 
Opposition  and  Censure;  as  it  is  not  only  the 
Author  of  such  Opinions,  but  many  of  those  who  have  con- 
curr'd  in  them,  that  are  apt  to  think  themselves  affected  by  it. 
It  is  this  Consideration,  together  with  Mr.  Locke's  eminently 
distinguished  Abilities,  and  truly  great  Character,  that  makes 
me  unwilling  to  call  in  Question,  so  long  after  his  Death,  any 
part  of  what  he  has  wrote;  but  as  it  is  upon  a  Subject  of  gen- 
eral Concern  which  cannot  be  too  particularly  considered ;  I 
hope,  those  who  have  already  approved  of  what  that  Gentleman 
hus  said  concerning  Interest,  will  not  disapprove  of  what  I 
have  wrote,  unless  it  be  for  some  weightier  Reason,  than  that 
of  differing  from  him;  which,  with  the  candid  Part  of  the 
World,  will  not,  I  flatter  myself,  be  looked  upon  as  any  want 
of  Respect  for  his  Memory;  for  there  are  few,  if  any,  who  have 
a  greater  Veneration  for  it,  ||  than  myself;  and  though  I  can-  iv  Pref. 
not  agree  with  him  in  every  'Particular,  yet  I  think,  the  great- 
est Part  of  what  he  has  said  upon  Coin,  and  Commerce,  is 
unanswerable. 

Every  one  who  is  acquainted  with  Mr.  Locke's  Works  mitst 
be  satisfied,  he  was  too  great  a  Lover  of  Truth,  to  object 
against  an  Inquiry  into  any  Thing  he  wrote;  and  I  hope  none 


10 


Preface 


vnll  think  me  wrong  in  taking  a  Liberty  which  he  himself 
would  have  allowed,  had  he  been  living ;  as  I  have  made  no 
other  Use  of  it,  than  that  of  endeavouring  to  find  out  what  the 
Rate  of  Interest  depends  on,  which  may  possibly  be  in  some 
Degree  useful  or  satisfactory  at  this  Time,  to  those  who  are 
inclined  to  employ  their  Thoughts  that  Way. 


AN 


ESSAY 

ON    THE 

Governing  Causes  of   the   Natural    Rate 
of  INTEREST,   kc. 


FTEE  Sir  William  Petty  and  Mr.  Loclce 
have  said  what  governs  the  Eate  of  Interest, 
any  further  Considerations  on  the  Subject 
may  perhaps  be  thought  unnecessary; 
whether  they  really  are  so  or  not,  I  will  not 
say,  but  shall  leave  every  one  to  judge  for 
themselves,  when  they  have  read  the  following  Observations 
upon  the  Sentiments  of  those  gentlemen,  which  I  have  here 
collected,  and  shall  refer  to  by  Figures,  as  often  as  I  have 
Occasion  to  mention  them.||  6 

Extracts  from  Sir  William  Petty's  Political  Arithmetic^,  and 
Mr.  Locke's  Treatise  on  Interest,  &c.' 

From  Sir  W.  Petty's  Political  Arithmeticlc,  Third  Edition, 
printed  in  the  Year  1699.* 

"  1.  As  to  Money,  the  Interest  thereof  was  within  this  fifty 
"  Years,*  at  101.  per  Cent,  forty  years  ago,  at  8?.  and  now  at 


*  Interest  was  reduced  by  Law  from  10  to  8  per  Cent.  Anno  1623, 
and  from  8  to  6  per  Cent,  in  1660. 


12  Joseph  Massie 

"  61.  no  Tlianks  to  any  Laws  which  have  been  made  to  that  Pur- 
"  pose,  for  as  much  as  those  who  can  give  good  Security,  may 
"now  have  it  at  less:  But  tlie  natural  Fall  of  Interest,  is  the 
"  Effect  of  the  Increase  of  Money."    Chap.  6.  page  259. 

From  Mr.  Locke's  Treatise  on  Interest,  &c.' 

"  2.  By  natural  Use,  I  mean  that  Rate  of  Money,  which  the 
"  present  Scarcity  of  it  makes  it  naturally  at,  upon  an  equal 
"  Distribution  of  it."  Folio  Edition  of  his  Works,  printed  in 
1740.    Vol  2.    Page  6. 

"  3.  Now,  I  think,  the  natural  Interest  of  Money  is  raised 
"  in  two  Ways.  First,  When  the  Money  of  a  Coimtry  is  but 
"little,  in  Proportion  to  the  Debts  of  the  Inhabitants,  one 
"  amongst  other.  For,  suppose  Ten  Thousand  Pounds  were 
"  sufficient  to  manage  the  Trade  of  Bermudas,  and  that  the 
"ten  first  Planters  carried  over  Twenty  Thousand  Pounds, 
"which  they  lent  to  the  several  Tradesmen  and  Inhabitants 
7 "of  the  Countr}',  who  living  above  their  Gains,  ||  had  spent 
"  Ten  Thousand  Pounds  of  this  Money,  and  it  were  gone  out 
"  of  the  Island :  'Tis  evident,  that,  should  all  the  Creditors  at 
"  once  call  in  their  Money,  there  would  be  a  great  Scarcity  of 
*'  Money,  when  that,  employ'd  in  Trade,  must  be  taken  out  of 
"  the  Tradesmen's  Hands  to  pay  Debts ;  or  else  the  Debtors 
"  want  Money,  and  be  exposed  to  their  Creditors,  and  so 
"  Interest  will  be  high.  But  this  seldom  happening,  that  all, 
"  or  the  greatest  Part  of  the  Creditors,  do  at  once  call  for 
*'  their  money,  unless  it  be  in  some  great  and  general  Danger, 
"  is  less  and  seldomer  felt  than  the  following,  unless  where  the 
"  Debts  of  the  People  are  grown  to  a  greater  Proportion ;  for 
"  that,  constantly  causing  more  Borrowers,  than  there  can  be 
"  Lenders,  will  make  Money  scarce,  and  consequently  Interest 
"  high. 

""  Secondly,  That  which  constantly  raises  the  natural  In- 
"  terest  of  Money,  is,  when  Money  is  little,  in  Proportion  to 
"  the  Trade  of  a  Country.  For  in  Trade,  every  Body  calls  for 
"  Money,  according  as  he  wants  it,  and  this  Disproportion  is 


The  J^atural  Eate  of  Interest 


"  always  felt.  For,  if  Englishmen  owed  in  all  but  one  Million, 
"  and  there  were  a  Million  of  Money  in  England,  the  Money 
"  would  be  well  enough  proportion'd  to  the  Debts ;  but,  if  two 
"  Millions  were  necessary  to  carry  on  the  Trade,  there  would  be 
"  a  Million  wanting,  and  the  Price  of  Money  would  be  raised, 
"as  it  is  of  any  other  Commodity  in  a  Market,  where  the 
"Merchandize  will  not  serve  half  the  Customers,  and  there 
"  are  two  Buyers  for  one  Seller."'    Page  6. 

"  4.  The  lowering  of  Interest  to  4  per  Cent,  will  be  a  Gain  to 
"the  borrowing  Merchant.    For,  if  he  borrow  at  4  per  Gent. 
"  and  his  Ee  ||  turns  be  12  per  Cent,  he  will  have  8  per  Cent,  i 
"  and  the  Lender  Four :   Whereas  now  they  divide  the  Profit 
"  equally  as  6  per  Cent."    Pag.  7. 

"  5.  For  no  Country  borrows  of  its  Neighbours,  but  where 
"  there  is  need  of  Money  for  Trade ;  no  Body  will  borrow  more 
"  of  a  Foreigner,  to  let  it  lie  still."    'Pag.  9. 

"  6.  So  that,  if  the  Merchant's  Eeturn  be  more  than  his 
"Use  (which  'tis  certain  it  is,  or  else  he  will  not  trade,  &c.)" 
Pag.  9. 

"  7.  It  cannot  well  be  thought,  that  less  than  one  fiftieth 
"  Part  of  the  Labourer's  Wages,  one  fourth  Part  of 
"  the  Landholder's  yearly  Eevenue,  and  one  twentieth  Part 
"  of  the  Broker's  *  yearly  Eetums  in  ready  Money,  will 
"  be  enough  to  drive  the  Trade  of  any  Country.  At  least,  to 
"  put  it  beyond  Exception  low  enough,  it  cannot  be  imagin'd 
"  that  less  than  one  Moiety,  of  this,  i.  e.  less  than  one  hun- 
"  dredth  Part  of  the  Labourer's  yearly  Wages,  one  eighth  Part 
"  of  Landholder's  yearly  Eevenue,  and  one  fortieth  Part  of  the 
"  Broker's  yearly  Eetums,  in  ready  Money,  can  be  enough  to 
"move  the  several  Wheels  of  Trade,  and  keep  up  Commerce, 
"  in  that  Life  and  thriving  Posture  it  should  be ;  and  how 
"  much  the  ready  Cash  of  any  Country  is  short  of  this  Pro- 
"  portion,  so  much  must  the  Trade  be  impair'd  and  hinder'd 
"  for  want  of  Money."    Pag.  15. 

*  Tradesmen. 


14  Joseph  Massie 

"  8.  It  may  then  so  liappen  at  the  same  Time,  that  half  an 
"  Ounce  of  Silver,  that  the  Year  before  would  buy  one  Bushel 
*'  of  \Mieat,  will  this  year  buy  but  one  tenth  of  a  Bushel ;  half 
"  an  Ounce  of  Silver,  that  the  Year  before  would  have  bought 
"three  Bushels  of  Oats,  will  this  Year  still  buy  one  Bushel; 

9  "  and  at  the  same  ||  Time  half  an  Ounce  of  Silver,  that  would 
"  the  Year  before  have  bought  fifteen  Pounds  of  Lead,  will 
"  still  buy  the  same  Quantity.  So  that  at  the  same  Time  Sil- 
"ver,  in  respect  of  Wheat,  is  nine  tenths  less  worth  than  it 
"was,  in  Eespect  of  Oats  two  Thirds  less  worth,  and  in  Re- 
"  spect  of  Lead  as  much  worth  as  before.  The  Fall,  therefore, 
"  or  Rise  of  Interest,  making  immediately,  by  its  Change, 
"  neither  more  nor  less  Land,  Money,  or  any  Sort  of  Com- 
"modity  in  England,  than  there  was  before,  alters  not  at  all 
"  the  Value  of  Money  in  Reference  to  Commodities.  Because 
"the  Measure  of  that  is  only  the  Quantity  and  Vent,  which 
"  are  not  immediately  changed  by  the  Change  of  Interest.  So 
"  far  as  the  Change  of  Interest  conduces,  in  Trade,  to  the 
"bringing  in,  or  carrying  out  Mone}',  or  Commodities,  and 
"  so  in  Time  to  the  varying  their  Proportions  here  in  Eng- 
"  land,  from  what  it  was  before;  so  far  the  Change  of  Interest, 
"  as  all  other  Things  that  promote,  or  hinder  Trade,  may  alter 
"  the  Value  of  Money,  in  Reference  to  Commodities."  'Page 
17. 

9.  First,  "  That  the  Value  of  Laud  consists  in  this,  that,  by 
"  its  constant  Production  of  saleable  Commodities,  it  brings 
"  in  a  certain  yearly  Income.  Secondly,  The  Value  of  Com- 
"  modities  consists  in  this,  that  as  portable  and  useful  Things, 
"  they,  by  their  Exchange  or  Consumption,  supply  the  ISTeces- 
"  sariee,  or  Conveniences  of  Life.  Thirdl}',  In  Money  there  is 
"a  double  Value,  answering  to  both  of  these;  1.  As  it  is 
"  capable,  by  its  Interest,  to  yield  us  such  a  yearly  Income : 
"  And  in  this  it  has  the  Nature  of  Land,  (the  Income  of  one 
"  being  called  Bent,  of  the  other  Use)   Page  17,  18.    2.  Money 

10 "has  a  Va  ||  lue,  as  it  is  capable,  by  Exchange,  to  procure  us 


The  Xatural  Eate  of  Interest  15 

"  the  Necessaries,  and  Conveniences  of  Life,  and  in  this  it  has 
"  the  Nature  of  a  Commodity/'    Page  18. 

10.  "  Mone}'  therefore,  in  buying  and  elliug,  being  perfectly 
"  in  tlie  same  Condition  with  other  Commodities,  and  subject 
"  to  all  tlie  same  Laws  of  Value ;  let  us  next  see  how  it  comes 
"  to  be  of  the  same  Nature  with  Land,  by  yielding  a  certain 
"yearly  Income,  which  we  call  Use  or  Interest.  For  Land 
"produces  naturally  something  new  and  profitable,  and  of 
"  value  to  Mankind ;  but  Money  is  a  barren  Thing,  and  pro- 
"  duces  nothing,  but  by  Compact,  transfers  that  Profit,  that 
"  was  the  Eeward  of  one  Man's  Labour,  into  another  Man's 
"  Pocket.  That  which  occasions  this,  is  the  unequal  Distri- 
"  bution  of  Money;  which  Inequality  has  the  same  Effect  too 
"  upon  Land,  that  it  has  upon  Money.  For  my  having  more 
"  Money  in  my  Hand  than  I  can,  or  am  disposed  to  use  in 
"buying,  or  selling,  makes  me  able  to  lend:  And  another's 
"  Wajit  of  so  much  Money  as  he  could  employ  in  Trade,  makes 
"  him  willing  to  borrow.  But  why  then,  and  for  what  Con- 
"  sideration  doth  he  pay  Use  ?  For  the  same  Eeason,  and  upon 
"  as  good  Consideration,  as  the  Tenant  pays  Eent  for  your 
"  Land.  For  as  the  unequal  Distribution  of  Land,  (you  hav- 
"  ing  more  than  you  can,  or  will  manure,  and  another  less) 
"  brings  you  a  Tenant  for  your  Land ;  and  the  same  unequal 
"Distribution  of  Money  (I  having  more  than  I  can,  or  will 
"  employ,  and  another  less)  brings  me  a  Tenant  for  my 
"  Money :  So  my  Money  is  apt  in  Trade,  by  the  Industry  of 
"  the  Borrower,  to  produce  more  than  6  per  Cent,  to  the  Bor- 

"  rower,  as  well  as  your  Land,  by  the  Labour  of  the  Tenant,  ||  n 
"  is  apt  to  produce  more  Fruits,  than  his  Eent  comes  to ;  and 
"  therefore  deserves  to  be  paid  for,  as  well  as  Land,  by  a  yearly 
"  Eent."    Pag.  19. 

11.  "It  being  only  the  Change  of  the  Quantity  of  Wheat  to 
"  its  Vent,  supposing  we  have  still  the  same  Sum  of  Money  in 
"  the  Kingdom ;  or  else  the  Change  of  the  Quantity  of  our 
"  Money  in  the  Kingdom,  supposing  the  Quantity  of  Wheat, 
"in  Eespect  to  its  Vent  be  the  same  too,  that  makes  the 


16  Joseph  Massie 

"  Change  in  the  Price  al  Wheat.  For  if  you  alter  tlie  Quan- 
"  tity,  or  Vent,  on  either  Side,  you  presently  alter  the  Price, 
"  but  no  otlier  Way  in  the  World."  Parjc  21. 

13.  "That,  which  raises  the  natural  Interest  of  iloney,  is 
"  the  same  that  raises  the  Rent  of  Land,  i.  e.  its  Aptness  to 
"  bring  in  yearly  to  him  that  manages  it,  a  greater  Overplus 
"  of  Income,  above  his  Pent,  as  a  Pcward  to  his  Labour.  That, 
"  wliicli  causes  this  in  Land,  is  the  greater  Quantity  of  its 
"  Product,  in  Proportion  to  the  same  Vent  of  that  particular 
-  "  Fruit,  or  the  same  Quantity  of  Product,  in  Proportion  to  a 
"greater  Vent  of  that  single  Commodity;  but  that,  which 
"  causes  Increase  of  Profit  to  the  Borrower  of  Money,  is  the 
"  less  Quantity  of  Money,  in  Proportion  to  Trade,  or  to  the 
"  Vent  of  all  Commodities,  taken  together,  and  vice  versa. 

"The  natural. Value  of  Money,  as  it  is  apt  to  yield  such  an 
"  yearly  Income  by  Interest,  depends  on  the  whole  Quantity 
"  of  the  then  passing  Money  of  the  Kingdom,  in  Proportion  to 
"  the  whole  Trade  of  the  Kingdom,  i.  e.  the  general  Vent  of  all 
"  the  Commodities.  But  the  natural  Value  of  Money,  in  ex- 
"  changing  for  any  one  Commodit}',  is  the  Quantity  of  the 
12 "trading  Money  of  the  Kingdom,  designed  for  that  ||  Com- 
"modity,  in  Proportion  to  that  single  Commodity  and  its 
"Vent.  For  though  any  single  Man's  Necessity  and  Want, 
"  either  of  Money,  or  any  Species  of  Commodit}^  being  known, 
"  may  make  him  pay  dearer  for  Money,  or  that  Commodity ; 
"3'et  this  is  but  a  particular  Case,  that  does  not  at  the  same 
"  Time  alter  this  constant  and  general  Rule."  Page  24. 

13.  "That  supposing  Wheat  a  standing  Measure,  that  is, 
"that  there  is  constantly  the  same  Quantity  of  it,  in  Propor- 
"  tion  to  its  Vent,  we  shall  find  Money  to  run  the  same  Variety 
"of  Changes  in  its  Value,  as  all  other  Commodities  do.  Now 
"  that  Wheat  in  England  does  come  nearest  to  a  standing 
"  Measure,  is  evident  by  comparing  Wheat  with  other  Com- 
"  modifies,  Money,  and  the  yearly  Income  of  Land,  in  Henry 
"  the  Seventh's  Time,  and  now.  For  supposing  that  Primo 
"lien.  T  V.  let  100  Acres  of  Land  to  A.  for  6^/  per  Annum, 


The  Xatural  Eate  of  Interest  17 

"  per  Acre,  Eack-Eent,  find  to  B.  another  100  Acres  of  Land, 
"of  tlie  same  Soil  and  yearly  Worth  with  the  former,  for  a 
"  Busliel  of  Wheat  per  Acre,  Eack-Eent,  (a  Bushel  of  Wheat 
"about  that  Time,  being  probably  sold  for  about  Q)d.)  it  was 
''  then  an  equal  Eent.  If,  therefore,  these  Leases  were  for 
"  Years  yet  to  come,  it  is  certain  that  he,  that  paid  but  GcZ. 
"per  Acre,  would  pay  now  SOs.  per  Annum,  and  he  that  paid 
"  a  Bushel  of  Wheat  per  Acre,  would  pay  now  about  25L  per 
"Annum,  which  would  be  near  about  the  yearly  Value  of  the 
"  Land,  were  it  to  be  let  now.  The  Eeason  whereof  is  this, 
"  that  there  being  ten  Times  as  much  Silver  now  in  the  World 
"  (the  Discovery  of  the  West-Indies  having  made  the  Plenty) 
"  as  there  was  then,  it  is  nine  Tenths  less  Worth  now,  than  it 
"'  was  at  that  Time;  that  is,  it  ||  will  exchange  for  nine-Tenths  13 
"'  less  of  any  Commodity  now,  which  bears  the  same  Propor- 
"  tiou  to  its  Yent,  as  it  did  200  Years  since;  which  of  all  other 
"  Commodities,  Wheat  is  likeliest  to  do.  For  in  England,  and 
"  this  Part  of  the  World,  Wheat  being  the  constant  and  most 
"'  general  Food,  not  altering  with  the  Fashion,  not  growing  by 
"  Chance ;  but  as  the  Farmers  sow  more  or  less  of  it,  which 
"  they  endeavour  to  proportion,  as  near  as  can  be  guessed,  to 
"  the  Consumption,  abstracting  the  Overplus  of  the  precedent 
"Year,  in  their  Provision  for  the  next;  and  vice  versa;  it 
"  must  needs  fall  out.  that  it  "  keeps  the  nearest  Proportion 
"to  its  Consumption  (which  is  more  studied  and  designed  in 
"  this,  than  other  Commodities)  of  any  Thing,  if  you  take  it 
"  for  7  or  20  Years  together :  Though  perhaps  the  Plenty,  or 
•'  Scarcity  of  one  Year,  caused  by  the  Accidents  of  the  Season, 
"'  may  very  much  vary  it  from  the  immediately  precedent,  or 
"  following.  Wheat,  therefore,  in  this  Part  of  the  World,  (and 
"that  Grain,  which  is  the  constant  general  Food  of  any  other 
"  Country)  is  the  fittest  Measure  to  judge  of  the  alter'd  Value 
"  of  Things,  in  any  long  Tract  of  Time."    Page  24:,  25. 

14.  "  For,  supposing  the  Balance  of  Trade  to  he  equal  be- 
"  tween  England  and  Holland,  but  that  there  is  in  Holland  a 
"greater  Plenty  of  Money  than  in  England  (which  will  ap- 


18  Joseph  Massie 

"  pear  by  the  Lowness  of  the  natural  Use  in  Holland,  and  the 
"  Heighth  of  the  natural  Use  in  England;  &c."    Page  27. 

15.  "'Tis  seldom  a  thriving  Man  turns  his  Land  into 
"Money,  to  make  tlie  greater  Advantage:  The  Examples  of  it 
14  "  are  so  rare  that  they  ||  are  scarce  of  any  Consideration  in  the 
"  Number  of  Sellers. 

"This,  I  think,  may  be  the  Eeason,  why  in  Queen  Eliza- 
"  beth's  Days,  (when  Sobriety,  Frugality,  and  Industry, 
"  brought  in  daily  Increase  to  the  growing  Wealth  of  the  King- 
"dom)  Land  kept  up  its  Price,  and  sold  for  more  Years  Pur- 
"  chase,  than  corresponded  to  the  Interest  of  Money,  then 
"  busily  employed  in  a  thriving  Trade,  which  made  the  natural 
"  Interest  much  higher  than  it  is  now,  as  well  as  the  Parlia- 
"  ment  then  set  it  higher  by  Law."  Pag.  28. 

"  16.  High  Interest  is  thought  by  some  a  Prejudice  to 
"Trade:  but  if  Ave  look  back,  we  shall  find,  that  England 
"never  throve  so  well,  nor  was  there  ever  brought  into  Eng- 
"  land  so  great  an  increase  of  Wealth  since,  as  in  Queen  Eliza- 
"  heth's  and  King  James  I.  and  King  Charles  I.  Time,  when 
"Money  was  at  10  and  8  per  Cent.  1  will  not  say  high  In- 
"terest  Avas  the  Cause  of  it;  for  I  rather  think  that  our  thriv- 
"ing  Trade  was  the  Cause  of  high  Interest,  every  one  craving 
"  Money  to  employ  in  a  profitable  Commerce."    Pag.  34. 

17.  "  Indeed,  I  grant  it  would  be  well  for  England,  and  I 
"  Avish  it  were  so,  that  the  Plenty  of  Money  were  so  great 
"  amongst  us,  that  every  Man  could  borrow,  as  much  as  he 
"  could  use  in  Trade,  for  4  per  Cent,  nay,  that  Men  could  bor- 
"  roAv  as  much  as  they  could  employ  for  6  per  Cent.  But  even 
"  at  that  Eate,  the  Borrowers  already  are  far  more  than  the 
"  Lenders."    Pag.  39. 

It  appears  from  these  several  Extracts,  that  Mr.  Locke 
attributes  the  Government  of  the  natural  Eate  of  Interest  to 
the  Proportion  which  the  Quantity  of  Money  in  a  Country 
bears  to  the  Debts  of  its  Inhabitants  one  amongst  another, 
15 and  II  to  the  Trade  of  it;  and  that  Sir  William  Petty  makes  it 
depend  on  the  Quantity  of  Money  alone ;  so  they  only  differ  in 


The  Xatural  Eate  of  Interest  19 

regard  to  Debts;  for  though  they  express  themselves  differ- 
ently concerning  Money,  yet  it  is  plain  they  mean  one  and  the 
same  Thing. 

Mr.  Locke  also  mentions  the  Profits  of  Trade  as  instru- 
mental in  raising  Interest,  for  Extract  16,  he  accounts  for  the 
high  Eate  of  Interest  in  Queen  Elizabeth's  Eeign,  by  the 
Profits  of  Trade ;  but  then  he  subjects  them  to  the  Proportion 
which  the  Quantity  of  Money  bears  to  Trade:  For  (Extract 
12.)  he  says,  "That  which  causes  Increase  of  Profit  to  the 
"  Borrower  of  Money,  is  the  less  Quantity  of  Money,  in  pro- 
"  portion  to  Trade,  or  to  the  Yent  of  all  Commodities  taken 
"  together,  and  vice  versa,  &c."  From  whence  it  is  evident  he 
thouglit  the  Proportion  which  Money  bore  to  Trade,  not  only 
governed  Interest,  but  the  Profits  of  Trade  likewise. 

These  are  the  Sentiments  of  those  Gentlemen,  and  these 
would  have  been  mine,  had  Experience  even  left  the  Matter 
doubtful :  But  when  I  found  Mr.  Locke's  Position  relating 
to  the  Proportion  of  Debts  clash'd  with  Facts  it  should  have 
agreed  with,  and  the  principal  Position,  concerning  the  Pro- 
portion of  Money,  contradicted  by  the  very  kind  of  Expe- 
rience which  Mr.  Locke  himself  points  out  as  the  best,  I  could 
not  help  differing  from  them. 

ON  THE  PROPORTION  OF  DEBTS. 

"  Now  I  think  the  iSTatural  Interest  of  Money  is  raised  two 
"  ways :  First,  When  the  Money  of  a  Country  is  but  little,  in 
"  Proportion  to  the  Debts  of  the  Inhabitants  one  amongst 
"another."    {Extract  S.)\\  16 

If  Debts  had  so  considerable  an  Influence  over  Natural 
Interest,  as  Mr.  Locke  attributes  to  them,  one  might  reason- 
ably expect  to  have  found  the  present  Eate  of  it  more  than 
half  Avhat  is  was  150  Years  ago :  For  if  the  Debts  which  were 
then  owing  by  the  Inhabitants  of  this  Island,  one  among  an- 
other, were  a  principal  Cause  of  Interest  being  so  high  as  10 
per  Cent,  per  Annum,  the  Alterations  which  have  since  hap- 


20  Joseph  Massie 

pened  here  in  tliat  Respect,  as  well  in  private  as  publiek  Af- 
fairs, are  Arguments  for  its  being  above,  and  not  l)el(nv,  that 
Rate. 

Luxury  and  Extravagance  are  much  more  general  among 
private  People  now,  than  tliey  were  formerly;  and  these  can- 
not increase,  without  producing  an  Increase  of  Debts;  and  the 
State  of  the  Nation,  in  respect  of  publiek  Debt,  is  Avorse  than 
it  was  150  Years  ago,  almost  beyond  Comparison :  For  then 
the  publiek  Revenues  commonly  defrayed  the  current  Ex- 
pences;  whereas  now,  by  frequent  Mortgages,  the  Publiek  is, 
and  has  been  for  many  Years,  at  least  twice  as  much  Money  in 
debt,  as  there  ever  was  supposed  Specie  in  the  Xation  at  any 
one  Time  to  pay;  the  greater  Part  of  which  is,  no  doubt, 
owing  to  the  Inhabitants  of  this  Country:  So  that  if  any 
Inference  is  to  be  made  concerning  the  present  Rate  of  In- 
terest, from  a  Comparison  of  the  publiek  and  private  Debts  of 
this  Age,  with  those  of  our  Ancestors,  it  should,  according  to 
i\Ir.  Locke's  Rule,  be  higher  than  it  was  150  Years  ago.  It 
does  not  seem  extravagant  to  suppose  such  a  Load  of  Debts  as 
this,  must  have  raised  Interest  to  20  per  Cent,  but  no  one 
could  well  imagine  it  to  be  less  than  15  per  Cent,  which  being 
full  three  times  as  much  as  has  for  many  Years  been  paid  for 
Interest,  sufficiently  demonstrates  how  little  the  Debts  of 
17  People,  one  amongst  ||  another,  have  to  do  with  the  Rate  of 
Interest  in  the  Country  wherein  they  live,  for  any  considerable 
Tract  of  Time.  Nor  will  taking  the  Position  in  a  niore  lim- 
ited Sense,  make  much  Difference;  for  we  see  that  notwith- 
standing the  national  Debt  has  increased  from  forty-five  to 
seventy-eight  Millions  since  the  Year  1740,  (according  to  a 
State  of  it  lately  publislied  in  a  Pamphlet,  entitled.  Considera- 
tions upon  a  Reduction  of  the  Land-Ta.r)*  the  Rate  of  Interest 
among  private  People  in  general,  is  now  mtuh  the  same  as  it 
was  at  that  Time :  It  is  indeed  somewhat  higher  to  the  Gov- 
ernment than  it  M'as  ten  Years  ago,  the  Reason  of  which  I  shall 
endeavour  to  shew,  when  I  come  to  speak  of  publiek  Credit: 
At  present  I  shall  only  say,  that  suddenly  collecting  gi'eat 


The  Natural  Rate  of  IxVterest  21 

Sums  of  JMoney  does  iindoiibtedly  at  the  Time,  raise  the  Rate 
of  Interest  with  Numbers  of  private  People;  just  as  buying 
great  Quantities  of  Wheat  raises  the  Price  of  that  particular 
Commodity:  And  thus  far  I  agree  with  Mr.  Loche:  But  it 
is  manifest  from  what  has  been  said,  that  when  the  Demands 
which  occasioned  such  Pise  is  satisfied,  Interest  soon  returns 
to  its  natural  Eate :  For  the  Price  which  Honey  bears  in 
"Times  of  general  Danger,  or  publick  Necessity,  cannot  be 
call'd  so,  any  more  than  the  Price  which  a  Man  agrees  to  give 
for  Wheat  can  be  called  the  natural  Price  for  it,  when  the 
Seller  takes  an  Advantage  of  the  Buyer's  Necessitj^  or  can- 
not have  the  Assistance  of  Law  to  oblige  him  to  pay  for  it. 

It  may  possibly  be  remarked  by  some,  that  I  have  extended 
Mr.  LocTtc's  Position  further  than  he  designed,  by  bringing  in 
publick  Debts ;  but  the  Extension  is  only  in  Words,  and  not  in 
Fact ;  for  he  says,  "  Tlic  Debts  of  the  Inhabitants  one  amongst 
"other;"  and  what  the  Publick  owes  ||  to  private  Peopled 
here,  or  rather,  what  one  Part  of  the  Nation  owes  to  the  other, 
is  as  much  a  Debt  of  this  Sort,  as  any  that  can  be  named,  and 
only  differs  from  other  Debts  in  having  a  great  Number  of 
People  engaged  for  the  Payment  of  it,  instead  of  one,  or  a  few. 

As  to  the  Supposition  which  Mr.  Loclce  has  made  to  support 
his  Opinion,  concerning  the  Influence  of  Debts  in  this  Ee- 
spect,  I  must  beg  Leave  to  say,  I  neither  think  it  right,  nor 
can  agree  with  him  in  his  Conclusion. 

It  is  natural  enough  to  suppose  the  ten  first  Planters  who 
went  to  the  Island  of  Bermudas,  might  carry  with  them  20,000 
/.  not  knowing  what  Sum  of  Money  would  be  wanted  to  carry 
on  the  Trade  of  the  Island ;  but  then,  it  is  as  natural  to  think, 
that  when  they  came  there,  and  found  they  had  brought  twice 
as  much  j\Ioney  as  could  be  employed,  they  would  send  back  one 
half  of  it  to  their  ]\[other  Country,  or  to  some  other  Colony 
or  Place  where  Employment  could  be  found  for  it :  For  where 
is  the  Country  that  keeps  ten  Millions  of  Money  at  home, 
when  only  five  of  them  are  wanted,  without  lending  the  Over- 
plus to  Foreigners,  as  we  know  the  Dutch  and  Siriss  do?    Or 


22  Joseph  Massie 

where  is  the  Merchant,  Planter,  Farmer,  or  Tradesman,  who 
having  2000  I.  and  can  only  find  Employment  for  1000  /.  does 
not  lend  the  otlier  to  some  of  liis  Neighbours,  or  lay  it  out  in 
a  Purchase?  Certainly  no  Man  can  be  thought  to  act  so  im- 
prudently, much  less  any  Number  of  Men,  or  a  whole  Nation, 
But  if  these  Planters  should  act  so  contrary  to  their  In- 
terest, as  to  keep  the  whole  20,000  /.  in  the  Island,  it  would  be 
impossible  for  them  to  lend  it  all  at  Interest,  unless  the  In- 
habitants are  to  be  supposed  void  of  common  Understanding, 
I9which||is  what  any  Man  must  be  wlio  will  pay  Interest 
for  200  I.  when  he  wants  only  100  I.  and  yet  this  is  what  must 
be  done  in  order  to  the  whole  20,000  I.  being  lent  among  the 
People  of  the  Island.  It  is  therefore  morally  impossible  this 
Part  of  Mr.  Locke's  Supposition  should  ever  be  the  Case  any 
where;  nor  is  it  agreeable  to  what  he  himself  has  in  another 
Place  mentioned:  For  he  says,  {Extract  5.)  "That  no  Coun- 
"  try  borrows  of  its  Neighbours,  but  where  there  is  Need  of 
"  Money  for  Trade :  No  body  will  borrow  more  of  a  Foreigner 
to  let  it  lie  still/'  And  to  this  may  be  added.  That  no  body 
will  borrow  of  a  Neighbour  to  let  it  lie  still ;  for  borrowing  or 
not  borrowing,  depend  not  upon  those  who  are  able  lend,  being 
Foreigners  or  of  the  same  Country,  but  upon  the  Want  of 
Money,  which,  when  Men  have  occasion  for  it,  they  will  be 
glad  to  get  from  Foreigners  who  can  lend ;  but  they  will  not 
pay  Interest  for  it  to  their  Neighbours,  unless  they  are  under 
a  Necessity  of  doing  so. 

It  does  not  appear  from  the  other  Part  of  the  Supposition 
concerning  Extravagance,  whether  Mr.  Locke  means  it  of 
every  individual  Borrower  of  Money,  or  of  only  the  greater 
Part  of  them ;  nor  is  it  indeed  very  essential  to  know  in  which 
Sense  it  was  used,  for  though  the  Latter  is  most  probable,  be- 
cause it  is  the  fairest,  yet  in  Respect  of  the  Conclusion  it  is 
much  the  same,  whether  it  be  understood  in  the  one  Sense  or 
the  other.  I  take  it  for  granted  therefore,  that  it  is  a  general 
Extravagance,  but  not  an  universal  one,  which  is  there  meant ; 
in  this  Sense  then  let  us  inquire  what  Conclusions,  concerning 


The  Xatural  Rate  of  Interest  23 

an  Alteration  in  the  Eate  of  Interest,  can  be  justly  made  from 
the  Case  supposed ;  which  is,  that  ten  of  the  20,000  /.  before- 
mentioned,  were  spent  and  gone  out  of  the  Island,  ||  by  the  20 
People,  to  whom  it  was  lent,  living  above  their  Gains. 

Mr.  Loclce  says,  {Extract  3.)  "'Tis  evident,  that  should  all 
"  the  Creditors  at  once  call  in  their  Money,  there  would  be  a 
"  great  Scarciry  of  Money,  when  that  employed  in  Trade  must 
"  be  taken  out  of  the  Tradesmens  Hands  to  pay  Debts ;  or  else 
"  the  Debtors  want  Money,  and  be  exposed  to  their  Creditors, 
"  and  so  Interest  will  be  high."  That  Money  would  be  scarce 
among  such  of  these  People  as  were  called  upon  to  pay  their 
Debts,  is  undoubtedly  true ;  for  so  it  must  needs  be  with  a  Man 
who  owes  300  /.  and  has  got  only  100  I.  to  pay  it  with;  and 
that  the  Praemium  for  Money  lent  such  Men  will  be  high,  is 
very  certain :  But  there  is  a  Necessity  of  having  better  Proof 
than  this,  to  shew  that  Interest  will  be  liigh;  because  part  of 
the  Praemium  which  Lenders  receive  under  the  Name  of  In- 
terest, is,  in  all  Cases  where  there  is  Danger  of  losing,  a  Prae- 
mium of  Eisque,  and  not  of  Use;  and  there  being  a  very  great 
Eisque  of  losing  where  Borrowers  have,  by  their  Extravagance, 
spent  one  half  of  what  is  lent  them,  a  considerable  Part  of  the 
Praemium  paid  for  Money  by  such  Borrowers,  is  certainlj_a 
Praemiupi  of  Indemnity,  ajid  not  of  Use;  and  to  call  it  In- 
terest, is  as  improper  as  it  would  be  to  call  that  Praemium 
Interest,  which  a  Merchant  gives  an  Insurer,  to  have  his  Ship 
oF  Merchandise  insured  against  the  Dangers  of  the  Sea  or 
Enemies :  So  that  what  is  here  disguised  under  the  Name  of 
high  Interest,  is  in  Fact  no  such  Thing,  but  a  Praemium  of 
Use  and  Eisque  joined  together;  which  may  just  as  well  be 
called  high  Insurance  as  high  Interest,  for  it  is  as  much  the 
one  as  the  other. '][  31 

If  then  the  Praemium  paid  for  Money  by  these  extravagant 
Men,  in  the  Case  before-mentioned,  is  to  be  called  Interest, 
and  introduced  as  the  Standard  of  it,  there  must  first  be  taken 
from  it  so  much  as  the  Lenders  receive  for  the  Eisque  they 
run  of  losing  what  they  lend,  before  it  can  be  admitted  into 


24  Joseph  Massie 

Account;  ami  it  i?  easy  to  fix  what  this  is  at  all  Times,  when 
we  know  at  wJiat  Kate  a  Gentleman  can  borrow  ]\roney  upnn 
his  Land,  or  a  re])utable  Merchant  or  Tradesman  upon  his 
Bond  or  Note,  (which  I  take  to  be  the  Standards  for  deter- 
mining the  l?ates  of  Interest  upon  real  and  personal  Securi- 
ties) for  we  need  only  subtract  from  the  Eates  paid  by  other 
People,  the  Eates  paid  by  the  Gentleman,  Merchant,  or 
Tradesman,  and  the  Eemainders  will  be  the  Praemia  of  Eisque ; 
and  when  this  Method  has  been  taken  with  the  Praemia 
paid  by  the  Inhabitants  of  Bermudas,  we  shall  then  have  the 
true  Eate  of  Interest. 

Suppose  then,  that  the  20,000  I.  brought  there  by  the  first 
ten  Planters,  was  originally  lent  to  the  Tradesmen  and  Inhabi- 
tants of  the  Country  at  5  per  Cent,  per  AniiU7n.  but  that  the 
Planters,  upon  calling  for  their  Money,  and  finding  half  of  it 
spent,  and  gone  out  of  the  Island,  should  directly  insist  upon 
having  an  additional  Praemium  of  5  per  Cent,  from  all  those 
People  who  had  spent  half,  or  more,  of  wdiat  they  had  bor- 
rowed; w^ould  it  be  just  to  say  Interest  was  raised  to  10  per 
Cent.?  Certainly  not;  the  Contrary  is  evident,  not  only  from 
what  has  been  already  said,  but  also  from  the  Eate  at  which 
the  honest  and  prudent  Part  of  the  Inhabitants  would  still  be 
able  to  borrow  Money;  wdiich  is  the  old  Eate  of  5  per  Cent. 
for  if  People's  being  in  debt  twice  as  much  as  they  are  able 
to  pay,  is  to  be  assigned  as  a  Eeason  for  Interest  rising,  this 
22Eise  must  certainly  be  confined  to  such  extravagant  ||  People, 
and  cannot  at  all  affect  others,  who  have  lived  within  their 
Gains,  and  are  able  to  pay  their  Debts,  though  perhaps  not 
without  groat  Detriment  to  their  Affairs:  x^nd  therefore  of 
this  high  Praemium  of  10  per  Cent,  paid  for  ]\[oney  by  the 
Extravagant,  which,  according  to  Mr.  Loclce  is  all  to  be  called 
Interest,  there  is  only  one  half  of  it  really  so,  the  other  half 
being  a  Premium  of  Eisque  or  Insurance,  and  not  of  Use; 
and  consequently  his  Conclusion  that  Interest  will  be  high  in 
this  Case,  must  be  wrong. 


The  Xatural  Eate  of  Interest  25 

It  cannot  be  right  to  argue  about  Interest,  from  the  Pncmia 
which  such  Men  pay  for  Money,  because  that  is  introducing 
Dishonest}',  or  Extravagance  where  their  Contraries  are  al- 
ways understood  to  be,  when  there  is  only  personal  Security 
given;  as  it  is  essential  to  lending  upon  such  Security,  that 
there  be  a  moral  and  ti-ading  Certainty  of  Eepayment,  wliich 
cannot  be,  where  Dishonesty  or  Extravagance  prevail;  and 
therefore  all  Eisque,  more  than  what  is  unavoidably  produced 
by  the  Mutability  of  human  affairs,  must  either  be  intirely 
excluded  in  all  Considerations  relating  to  Interest,  or  there 
will  be  a  Necessity  for  allowing,  there  are,  or  may  be,  as  many 
different  Eates  of  it  in  a  Country,  at  one  and  the  same  Time, 
as  there  are  Chances  of  being  paid  or  not  paid,  between  an 
absolute  Certainty  of  the  one  and  the  other;  for  by  the  same 
Eule  that  any  one  Degree  of  Extravagance  is  admitted  into 
the  Account,  all  others  must;  the  Absurdity  of  which  is  ob- 
vious to  every  one. 

The  Eate  of  Interest  in  Great-Britain  for  Money  lent  upon 
personal  Security,  is  at  present  about  5  per  Cent,  but  if  In- 
quiry was  to  be  made  about  the  Eate  of  it,  among  such  sort  of 
People  as  had  borrowed  Money  on  their  personal  Securities 
to  employ  in  Trade,  and  spent  one  half  of  it,  there  ||  is  23 
Season  to  believe,  they  would  say  it  was  more  than  5  per  Cent. 
or  rather,  that  No-body  would  trust  them  with  any;  one  of 
the  two  it  is  certain  must  happen,  and  which  ever  it  be,  it  will 
shew  the  Case  Mr.  Locke  has  put,  will  not  admit  of  the  Con- 
clusion he  has  made. 

If  such  People  as  these  should  not  be  able  to  borrow  Money, 
as  is  most  probable  they  would  not,  it  cannot  be  right  to  sup- 
pose them  doing  what  is  not  in  their  Power ;  and  that  borrow- 
ing of  Money,  or  keeping  longer  the  Eemainder  of  what  they 
had  before  borrowed,  would  be  so,  is  evident  from  the  general 
Practice  of  Mankind :  For  what  Man  will  lend  Money  upon 
personal  Security  to  any  one,  who  he  knows  has  been  so  ex- 
travagant as  to  spend  half  of  a  Sum  he  had  before  borrowed 
of  another  Person?     Or  what  Creditor  who  finds  half  of  a 


26  Joseph  Massie 

Sum  he  has  lent,  squandered  away  by  the  Extragavance  of  a 
Borrower,  will  suffer  himself  to  be  amused  with  a  Promise  of 
being  paid  higher  Interest,  (if  the  Law  did  not  forbid  taking 
above  o  per  Cent.)  and  not  secure  by  the  Help  of  Law,  that 
half  of  his  ]\Ioney  which  is  still  in  his  Power  to  get?  Reason 
and  Experience  shew,  there  neither  are,  nor  can  be,  any  such 
Men;  or  at  least,  that  there  is  not  a  Number  of  them  sufficient 
to  justify  quoting  their  Conduct  as  the  general  Practice  of  the 
World. 

Much  Borrowing  and  Lending  among  the  Inhabitants  of  a 
Country,  is  not  the  Effect  of  a  Want  or  Scarcity  of  Money,  but 
of  an  unequal  Distribution  of  it ;  when  the  Eiches  of  a  Coun- 
try are  collected  into  a  few  Hands,  much  borrowing  naturally 
follows,  for  Affluence  of  Fortune  induces  most  Men  to  think 
of  Ease  and  Pleasure;  to  procure  which,  instead  of  employing 
their  Money  themselves,  they  must  let  it  out  to  other  People 
for  them  to  make  Profit  of,  reserving  for  the  Owners  a 
24  Pro  II  portion  of  the  Profits  so  made :  But  when  the  Eiches 
of  a  Country  are  dispersed  into  so  many  Hands,  and  so  equally 
divided,  as  not  to  leave  many  People  enough,  to  maintain  two 
Families,  by  employing  it  in  Trade,  there  can  be  little  borrow- 
ing; for  20,000  I.  when  it  belongs  to  one  Man,  may  be  lent, 
because  the  Interest  of  it  will  keep  a  Family,  but  if  it  belongs 
to  ten  i\ren,  it  cannot  be  lent,  because  the  Interest  of  it  will 
not  keep  ten  Families. 

It  may  possibly  be  said.  Quantity  of  Debts  must  have  an 
Influence  over  the  Eate  of  Interest,  because  the  Government 
during  the  two  last  Wars,  paid  dearer  almost  every  successive 
Year,  for  the  Money  borrowed  upon  the  publick  Eevenues:  I 
grant  the  Government  did  do  so;  but  at  the  same  time  I  can- 
not think,  this  Eise  of  Interest  was  owing  to  an  Increase  of 
Debts,  for  then  it  must  have  continued  high,  till  they  were 
discharged ;  which  it  has  not  done,  but  fallen  again  soon  after 
Peace  was  restored,  it  will  be  necessary  therefore  to  look  for 
some  other  Eeason  than  Quantity  of  Debts,  to  account  for  the 
Government's  having  paid  dearer  for  IMoney,  as  that  will  not 
explain  the  Matter. 


The  Xatural  Eate  of  Interest  27 

Publick  Faith  is  like  a  Merchant,  whose  Credit  falls  and 
rises,  as  his  Trade  declines  or  prospers:  When  the  Nation  is 
engaged  in  a  general  War,  and  the  Event  of  it  seems  likely  to 
be  unsuccessful,  or  remains  doubtful,  publick  Credit  will  sink, 
and  sometimes  even  below  that  of  a  private  Gentleman  or 
Merchant,  as  it  did  in  the  Keign  of  King  William,  and  in  the 
last  Eebellion  in  the  Year  1745,  when  the  Government  paid 
dearer  for  Money  than  private  People  did;  and  for  very 
natural  and  obvious  Eeasons;  the  Foundation  of  publick 
Credit,  which  is  publick  Security,  was  then  attacked,  not  only 
by  War  abroad,  but  by  Eebellion  at  home,  and  therefore  from 
Appearances,  monied  Men  at  ||  that  Time  thought  publick  25 
Security  not  so  good  as  private;  whether  their  Apprehensions 
were  just  or  not,  is  by  no  means  the  Question ;  it  was  sufficient 
if  any  of  those  who  had  Money  to  lend,  imagined  they  were; 
and  this,  it  is  plain  Numbers  did,  from  the  Government's 
having  been  able  to  borrow  Money  upon  cheaper  Terms,  since 
the  happy  Defeat  of  the  Eebels,'  than  was  done  in  the  Year 
1745,  notwithstanding  the  Continuance  of  War  with  France 
and  Spain,  and  an  Increase  of  national  Debt, 

If  from  this  low  Ebb  of  publick  Credit,  m'C  take  a  View  of  it 
in  Time  of  settled  Peace,  when  both  publick  Safety,  and  the 
established  Government,  are  far  removed  from  all  Appear- 
ances of  Danger,  it  will  be  found  high  above,  as  it  was  before 
much  below,  private  Credit:  The  Government  will  then  be 
able  to  raise  Money  upon  cheaper  Terms,  than  either  the 
Gentleman  or  the  Merchant;  not  merely  because  the  Security 
is  better,  but  partly  because  it  is  far  more  extensively  known 
than  the  Security  given  by  private  People.  The  Inhabitants 
of  this  Country  in  general,  and  those  of  many  other  Countries 
know,  that  publick  Faith  here  has  been  kept  sacred,  and  that 
what  they  lend  up  on  it,  is  as  secure,  if  not  more  so,  than  it 
can  be  in  any  other  Country ;  and  this,  together  with  the  lower 
Eate  of  Interest  in  Holland,  and  other  Countries,  is  what  has 
enabled  the  Government  to  borrow  Money  in  Time  of  Peace, 
and  even  sometimes  in  War,  cheaper  than  private  People  here 


28  Joseph  Massie 

can,  or  in  otiier  Words,  below  tlie  natural  Kate  of  Interest  in 
this  Countr}'. 

What  has  been  said  of  the  Government,  is  also  in  some 
Degree  applicable  to  the  Easl-lndia  Company,  whose  Credit 
is  so  well  established  as  to  cnaljle  them  to  borrow  Money 

36 cheaper  the  than  pri  ||  vato  ]\rerchant,  landed  Gentleman,  or 
even  the  Government,  can  do;  to  this  it  is  true,  the  Condition 
on  which  their  Bonds  are  issued  *,  contributes  more  than  a 
little,  for  they  may  be  esteemed  ready  Cash  running  at  In- 
terest, and  consequently  are  a  great  convenience  to  Bankers, 
ana  many  other  monied  Men,  who  cannot  suffer,  or  do  not 
chuse,  to  have  their  Money  engaged  so  as  not  to  be  able  to  com- 
mand it  immediately,  or  at  a  short  Notice:  The  Want  of  this 
Convenience  would  oblige  such  People  to  keep  large  Sums  by 
them  in  Specie  unemployed,  or  might  probably  compel  them, 
either  to  enter  more  into  Trade  than  they  do  now,  or  to  supply 
others  with  Money  for  that  Purpose,  with  more  Keadiness,  and 
at  more  easy  Eates  than  they  do  at  present :  But  how  far  this 
Consideration  may  merit  Attention  at  this  Time,  is  not  to  my 
Purpose. 

Now  I  am  speaking  of  the  Government  borrowing  Money,  I 
cannot  omit  mentioning  the  happy  Effects  which  preserving 
publick  Faith  inviolable,  has  produced:  I  think  it  has  done 
nothing  less  than  saved  the  Nation  from  Ruin;  for  it  seems 
difficult  to  conceive  how  the  many  millions  of  Money  which 
have  been  borrowed  to  carry  on  the  Wars  of  King  Williani, 
Queen  Anne,  and  his  present  Majesty  could  have  been  found, 
if  the  Dutch  and  others  had  not  been  able  to  lend,  or  how  they 
could  have  been  borrowed  upon  Terms  that  would  not  have 
involved  the  Nation  beyond  a  Possibility  of  recovering  by  just 
Measures,  if  Interest  had  not  been  much  lower  in  Holland  than 

27 it  was  here;  which,  in  this  Respect,  must  be  allow  ||  ed  to  have 

*  The  East-India  Company's  Bonds  are  payable  upon  six  Months 
Notice,  and  the  Company  receives  them  as  Cash  in  Payment  for 
Goods  bought  at  their  Sales,  w  hen  six  Months  Interest  is  due  upon 
them. 


The  Natural  Eate  of  Interest  29 

been  highh^  advantageous  to  Great-Britain,  however  disad- 
vantageous it  may  have  been  with  Eegard  to  our  Commerce: 
And  there  is  no  Doubt  to  be  made,  but  that  acting  with  the 
same  Equity  will  always  secure  to  this  Nation  the  like  Aid 
from  Foreigners  upon  any  future  Emergency,  which  is  very 
well  Worth  considering;  for  if  ever  publick  Necessity,  and  a 
Distrust  abroad,  of  this  Government's  being  able  or  willing  to 
preserve  publick  Faith,  should  make  borrowing  very  large 
Sums  of  Money  at  Home,  to  carry  on  a  foreign  War,  unavoid- 
able; it  would  cause  such  a  Confusion  in  the  Affairs  of  the 
Nation,  as,  I  hope,  will  never  be  seen  here,  and  might  at  last 
fall  short  of  answering  the  present  Necessity. 

But  to  return:  I  say  it  is  owing  to  the  beforementioned 
Causes,  that  the  Government  has  at  one  Time  been  able  to 
borrow  Money  at  2  per  Cent,  below  the  legal  Eate  of  Interest ; 
and  at  another  Time  been  obliged  to  pay  as  much  above  it, 
when  neither  the  landed  Gentleman,  Merchant,  or  Tradesman 
(who  are  the  People  to  determine  natural  Interest  by)  have 
at  the  same  Time  paid  more,  nor  above  1  per  Cent,  less  than 
the  legal  Eate ;  and  many  People  have  paid  invariably  one  and 
the  same  Eate,  and  this  either  one  of  those  last  mentioned,  or 
some  intermediate  one  for  the  whole  Time;  so  that  no  In- 
ferences can  justly  be  made  from  the  Eate  which  the  Govern- 
ment at  any  Time  pays,  as  it  oftner  differs  than  agrees  with 
the  natural  Eate  of  Interest  here ;  nor  is  it  possible  they  should 
keep  Pace  together,  for  a  formidable  Eebellion,  or  a  War  which 
threatens  a  Change  of  Government,  will  sink  publick  Credit 
below  that  of  private  People,  especially  when  great  Sums  of 
Money  lye  in  the  Hands  of  a  few  Men;  as  every  ||  one  who 28 
thinks  at  all  about  the  Matter,  naturally  makes  this  Conclu- 
sion within  himself,  that  Government  cannot  subsist  unless 
Men's  private  Eights  are  in  some  Degree  preserved;  and  that 
whatever  Changes  or  Eevolutions  of  Government  happen,  his 
Estate  or  Fortune  will  never  be  taken  from  him,  unless  he  has 
been  very  active  on  the  losing  Side  of  the  Question;  and  con- 
sequently, if  he  runs  any  Hazard  of  forfeiting  his  Estate,  by 


30  Joseph  Massie 

lending  the  Government  Money,  lie  will  have  a  Praemium  of 
Eisqne  adequate  to  it,  over  and  above  his  Interest.  On  the 
contrary  in  Times  of  Peace,  or  when  there  is  no  dangerous 
War  carrying  on,  and  Interest  is  lower  in  Holland,  &c.  than 
here,  the  Government  will  always  be  able  to  borrow  Money 
lower  than  the  natural  Rate  of  Interest  in  this  Country,  so 
long  as  publick  Faith  is  preserved  inviolable,  and  the  national 
Debt  does  not  increase  beyond  a  Probability  of  being  dis- 
charged by  a  frugal  Management  of  the  publick  Revenues,  for 
these  are  both  essential  to  the  Preservation  of  publick  Credit, 
and  though  the  Government  has  hitherto,  and  it  is  to  be  hoped 
always  will,  meet  with  a  Degree  of  Confidence  both  at  Home 
and  Abroad,  equal  to  the  Justness  of  its  Intentions ;  yet  these 
will  always  gain  or  lose  Weight  according  as  putting  them  in 
Execution  becomes  more  or  less  easily  practicable;  for  Men 
who  lend,  will  be  satisfied  about  the  Ability  as  well  as  the 
Integrity  of  a  Borrower,  before  they  part  with  their  Money, 
and  will  be  sure  to  make  him  pay  higher  for  it,  vAien  any 
Degree  of  Risque  appears,  however  just  his  Designs  may  be : 
And  this  is  a  Consideration,  which,  I  am  apt  to  think,  will 
make  some  People  less  inclinable  to  take  3  per  Cent.  Interest 
for  their  Money  from  the  Government  now,  than  they  were 
29  ten  Years  ||  ago,  when  the  national  Debt  was  above  thirty 
Millions  less. 

I  know  there  are  some  People  who  lay  great  Stress  upon  the 
Payment  of  the  national  Debt,  and  say,  if  that  was  discharged 
it  would  make  Interest  much  lower  than  it  is  at  present,  by 
bringing  more  Money  into  Trade ;  but  if  we  consider  the  Mat- 
ter a  little,  it  will  be  found,  that  paying  the  Debt  of  the 
Xation  will,  in  all  Probability,  raise,  and  not  lower,  the  Rate 
of  Interest;  and  instead  of  bringing  more  Money  into  Trade, 
will  carry  all,  or  most  of  that  which  is  already  in  Trade,  out 
of  the  Nation ;  for  such  Part  of  the  publick  Debt  as  is  owing 
to  Foreigners,  must  be  paid  by  Coin,  or  Bullion,  which  must 
be  sent  from  hence,  or  from  other  Countries  that  owe  Money 
to  this,  for  there  is  no  other  Way  by  which  it  can  be  paid. 


The  Xatural  Rate  of  Interest  31 

Suppose  then,  that  twenty  Millions  of  the  national  Debt, 
due  to  the  Dutch,  Swiss,  &c.  is  to  be  paid  in  twenty  Years; 
this  will  not  bring  more  Money  into  Trade,  but  take  so  much 
out  of  it,  as  there  is  little  Eeason  to  think  the  general  Bal- 
lance  of  Trade  will  answer  the  Deficiency  of,  especially  when 
to  this  annual  Export  of  a  Million  is  added  the  Interest  of 
what  remains  undischarged,  which  must  be  sent  abroad  as  well 
as  the  other;  so  that  till  Foreigners  are  repaid  all  they  have 
lent  the  jSTation,  Interest  must  rather  rise  than  fall,  by  lessen- 
ing the  national  Debt,  if  it  has  any  Dependence  on  the  Quan- 
tity of  Money  employed  in  Trade. 

Nor  can  I  find  there  is  any  Eeason  to  expect,  that  when  this 
Part  of  the  publick  Debt  is  discharged,  the  Payment  of  the 
other  Part,  due  to  People  in  Great  Britain,  will  cause  any  Fall 
in  the  Eate  of  Interest;  for  it  cannot  bring  more  Money  ||  30 
into  Trade  than  what  is  in  the  Xation,  and  all  of  that  which 
belongs  to  it,  and  is  intended  to  be  so  employed,  is  already  in 
Trade.  If  indeed  there  were  Mines  of  Gold  and  Silver  in  the 
Nation,  from  whence  the  Government  could  at  pleasure  extract 
a  Quantity  of  those  IMetals,  sufficient  to  pay  what  the  publick 
owes  to  private  People  here,  the  Discharge  of  the  national 
Debt  would  no  doubt,  bring  more  Money  into  Trade ;  but  since 
the  Government  has  no  such  Mines,  nor  any  Method  of  getting 
Money,  but  by  Taxes,  and  Imposts  levied  upon  land,  or  Com- 
modities produced,  or  consumed  here,  I  cannot  see  how  it  can 
possibly  bring  more  Money  into  Trade. 

This  Debt  can  be  paid  by  no  other  Method,  but  that  of  rais- 
ing more  Money  by  Taxes,  than  what  is  sufficient  to  answer  the 
publick  Expences.  Suppose  then,  that  the  State  of  the  Nation 
was  such  as  to  admit  of  a  Million  of  Money  being  raised  every 
Year,  more  than  the  current  Expences  required;  and  that  this 
Million,  so  raised,  was  to  be  applied  to  pay  off  the  national 
Debt ;  What  will  follow  from  hence  in  Eespect  of  the  Quantity 
of  Money  employed  in  Trade?  JSTot  an  Increase,  nor  yet  a 
Decrease,  but  only  that  there  will  be  just  the  same  Sum  as 
before;  so  soon  as  the  People  who  have  received  their  Debts  can 


32  Joseph  Massie 

citlior  lend  their  !^^oney  to  otlicrs  to  trade  with,  or  engage  in 
Trade  tliemsclvcs;  for  all  the  Difference  which  paying  this  Mil- 
lion of  Money  can  make,  is,  a  Cliange  of  Hands  in  Trade :  Had 
it  not  hcen  levied  and  consequently  not  paid,  the  Trade  of  the 
Nation  woidd  have  been  still  carried  on  by  the  same  People; 
but  being  paid,  it  will  bring  a  Number  of  l\ren  in  Trade  who 
were  not  engaged  in  it  before ;  and  there  will  be  Room  for  them 
and  their  Money,  without  depriving  those  of  a  Livelihood  who 
31  were  II  before  settled  in  Trade;  though  particular  Hardships 
and  Inconveniences  will  nevertheless  bo  felt;  for  it  is  impos- 
sible to  re-distribute  this  Money  in  Trade  in  the  same  manner 
as  before,  and  consequently  some  of  those  who  have  received 
their  Debts,  will  be  at  a  Loss  how  to  dispose  of  their  Money; 
but  most  of  all,  the  Widow  and  the  Fatherless,  who  have  no 
other  Means  of  living  than  by  the  Interest  of  their  Money: 
Eor  they  must  be  forced  to  seek  private  Securities,  and  hazard 
their  all,  upon  the  Honesty  and  Care  of  particular  Men;  and 
therefore  it  is  much  to  be  wished,  that  when  the  National  Debt 
is  discharged,  there  may  be  found  some  better  kind  of  Security 
for  this  helpless  Part  of  Society. 

From  this  Increase  of  Traders  it  may  be  thought,  the  Pay- 
ment of  the  publick  Debt  will  lower  the  Rate  of  Interest, 
though  it  does  not  bring  more  Money  into  Trade;  but  if  we 
consider,  how  much  cheaper  a  Reduction  of  Taxes,  will  make 
the  Commodities  and  Labour  of  this  Country,  than  they  are  at 
present,  and  consequently  how  much  greater  the  Demand  will 
be  for  them  abroad ;  there  will  be  little  Reason  to  apprehend  a 
Fall  in  the  Rate  of  Interest;  but  on  the  contrary,  rather  a 
Rise,  by  increasing  the  Trade  of  the  Nation  beyond  what  the 
Payment  of  the  national  Debt,  will  increase  the  Numlier  of 
Traders. 

All  Reasoning  about  natural  Interest  from  the  Rate  which 
the  Government  pays  for  Money,  is,  and  unavoidably  must  be 
fallacious;  Experience  has  shewn  us,  they  neither  liave  agreed, 
nor  preserved  a  Correspondence  with  each  other;  and  Reason 
tells  us  they  never  can;  for  the  one  has  its  Foundation  in 
Profit,  and  the  other  in  Necessity;  the  former  of  whicli  has 


The  Natural  Eate  of  Ixteeest  33 

Bounds,  but  the  latter  none:  The  Gentleman  who  borrows 
Money  to  ||  improve  his  Land,  and  the  Merchant  or  Trades- 33 
man  who  borrow  to  carry  on  Trade,  have  Limits  beyond  which 
they  will  not  go;  if  they  can  get  10  per  Cent,  by  Money,  they 
may  give  5  per  Cent,  for  it;  but  they  will  not  give  10;  whereas 
he  who  borrows  through  Necessity,  has  nothing  else  to  deter- 
mine by,  and  this  admits  of  no  Paile  at  all;  the  Law  cannot 
govern  where  it  prevails ;  for  if  it  could,  the  Government  would 
never  have  gone  beyond  the  Eule  which  is  prescribed  for 
private  Men;  but  Necessity,  whether  publick  or  private,  has 
no  Law. 

From  what  has  been  said,  I  think  it  is  evident,  that  neither 
publick  nor  private  Debts,  ha.ve  raised,  or  can  raise,  the 
natural  Eate  of  Interest.  The  next  Thing  to  be  considered,  is, 
whether  the  Proportion  which  Money  bears  to  Trade  governs 
Interest :  But  previous  to  this,  I  cannot  help  remarking,  that 
though  Mr.  Loche  looks  upon  Debts  as  a  principal  governing 
Cause  of  the  Eate  of  Interest,  he  nevertheless  has  Eecourse  to  a 
Scarcity  of  Money  to  account  for  that  Eise,  which,  according 
to  his  Position,  should  be  produced  by  the  Quantity  of  Debts 
alone;  for  he  says,  {Extract  3.)  "  But  this  seldom  happening, 
"  that  all,  or  the  greatest  Part,  of  the  Creditors  do  at  once  call 
"  for  their  Money,  unless  it  be  in  some  great  and  general 
"  Danger,  is  less  and  seldomer  felt,  than  the  following,  unless 
"  where  the  Debts  of  the  People  are  grown  to  a  greater  Propor- 
"tion;  for  that,  constantly  causing  more  Borrowers  than 
"there  can  be  Lenders,  will  make  Money  scarce,  and  con- 
"  sequently  Interest  high."  Now  if  Debts  have  so  great  an  In- 
fluence over  the  Eate  of  Interest  as  he  attributes  to  them,  what 
Occasion  is  there  for  bringing  in  a  Scarcity  of  Money  to  their 
Aid?  Or  if  it  be  a  Scarcity  of  Money  which  ||  produces  the 33 
Eise,  and  Debts  have  no  other  Concern  in  it,  than  as  they 
contribute  to  produce  a  Scarcity  of  Money,  why  is  that  called 
Essential  to  the  Eise  of  Interest,  which  is  not  so  ?  For  Debt 
in  this  Case  is  not  essential,  since  the  same  Scarcity  of  INIoney 
might  have  been,  without  any  Increase  of  Debt;  it  is  well 
known  there  are  more  Debts  owing  in  Great-Britain  and  Hoi- 


34  Joseph  Massie 

land,  than  there  is  Money  to  pay  them  with,  and  yet  there  is 
no  Scarcity  of  Money  in  either  Country;  and  it  is  ohvious 
enough  from  past  Experience,  that  an  open  Trade  witli  France 
would  cause  a  Scarcity  of  Money  here,  and  yet  it  would  not 
produce  an  Increase  of  Debt,  (at  least  none  that  can  be  of 
Weight  in  this  Case:)  For  the  French,  would  take  care  to  be 
paid  for  all  this  Nation  had  from  them;  and  it  would  be  as 
much  every  Man's  Care  here,  to  be  paid  for  what  his  Neigh- 
bours bought  of  him,  as  if  there  had  been  no  such  open  Trade; 
so  that  the  Quantity  of  Debts  in  a  Country  cannot  be  an  essen- 
tial governing  Cause  of  Interest;  if,  according  to  what  Mr. 
Locke  says,  they  raise  the  Eate  of  it,  by  making  Money  scarce; 
because  there  may  as  well  be  much  Money  where  there  is  much 
Debt,  as  little  Money  where  there  is  little  Debt,  and  conse- 
quently, high  or  low  Interest  in  either  Case. 

Nor  can  I  think  the  Scarcity  of  Money,  which  Mr.  Locke 
has  supposed  to  be  in  the  Island  of  Bermudas,  will  admit  of 
the  Inference  he  has  drawn  from  it,  even  though  his  Position 
was  just;  for  though  it  be  true  that  Money  would  be  scarce 
there,  yet,  we  must  not  mistake  a  particular  Scarcity  for  a 
general  one;  for  there  is  a  vast  Difference  between  only  a 
Number  of  Borrowers  wanting  Money  to  pay  their  Creditors, 
and  there  being  an  universal  Scarcity  of  Money  among  all 
34  Kinds  of  II  People,  as  well  those  who  are  not  Borrowers,  as 
those  who  are. 

The  first  kind  of  Scarcity  is  to  be  found  in  all  Countries, 
and  at  all  Times,  where  there  is  any  borrowing  at  all ;  for  Men 
don't  borrow  till  they  want,  and  consequently,  if  what  they 
borrow  is  suddenly  called  for  again,  they  must  find  Money 
sdarce  when  they  are  to  pay  their  Debts :  Because  by  so  doing, 
their  Affairs  will  be  again  involved  in  that  Confusion  and 
Distress ;  from  which  the  Use  of  the  Money  borrowed  would  in 
time  have  relieved  them ;  or  they  be  brought  into  Difficulties, 
which,  if  they  had  not  borrowed  j\Ioney,  they  had  never 
known ;  and  consequently  Money  being  scarce  with  Borrowers, 
when  they  are  suddenly  called  upon  to  pay  it,  is  no  Argument 
for  Interest  being  higher  at  one  time  than  another. 


The  Natural  Rate  of  Interest  35 

The  second  kind  of  Scarcity  is  the  only  one  which  can  be 
properly  so  called;  for  it  would  be  unjust  to  say,  there  was  a 
Scarcity  of  Money  in  Great  Britain,  because  there  are  a  Number 
of  extravagant  Borrowers  in  it,  with  whom  Money  is  a  scarce 
Commodity ;  as  it  might  by  the  same  Eule  be  said,  there  was  a 
Scarcity  of  Wheat  in  a  plentiful  Year,  because  a  Number  of 
People  through  Extravagance  had  not  Bread  to  eat;  and  yet 
this  is  the  kind  of  Scarcity  which  Mr.  Locke  says  would  raise 
the  Rate  of  Interest;  for  he  supposed,  in  the  Case  before- 
mentioned  of  Bermudas,  that  the  10,000  I.  which  remained 
in  the  Island,  was  sufficient  to  carry  on  the  Trade  of  it,  and 
consequently  the  Scarcity  of  Money  must  be  confined  to  the 
extravagant  Borrowers. 

Now  by  what  means  the  Planters  calling  in  this  10,000  I. 
could  produce  such  a  Scarcity  of  Money,  as  would  raise  the 
Kate  of  Interest  (supposing  it  depended  on  the  Quantity  of 
Money)  I  am  quite  ||  at  a  Loss  to  determine;  for  Men  who  call  35 
in  their  Money,  don't  let  it  lie  idle ;  but  either  lend  it  again  to 
other  People,  or  employ  it  in  Trade  themselves;  one  of  which 
the  Planters  must  be  supposed  to  do;  and  the  Quantity  of 
Money  circulating  in  the  Island,  being  the  same  after,  as  be- 
fore the  Recall ;  it  would  be  quite  indifferent  in  respect  of  the 
Rate  of  Interest,  whether  Peter  and  James,  or  Richard  and 
Thomas  were  the  Persons  to  whom  it  was  lent ;  or  whether  the 
ten  Planters  employed  the  greatest  Part  of  it  in  Trade  them- 
selves; As  it  is  not  calling  Money  out  of  Peter's  and  James's 
Hands,  and  putting  it  into  Richard's  and  Thomas's,  or  taking 
it  from  a  Borrower  and  returning  it  to  a  Lender,  but  taking 
it  out  of  the  Course  of  Circulation,  or  out  of  a  Country,  which 
makes  Money  scarce. 

ON  THE  QUANTITY  OF  MONEY. 

"But  the  natural  Fall  of  Interest,  is  the  Effect  of  the 
"Increease  of  Money,  {Extract  1.) 

"  Secondly,  That,  which  constantly  raises  the  natural  In- 
"terest  of  Money,  is,  when  Money  is  little,  in  proportion  to 
"the  Trade  of  a  Country,  {Extract  3.)" 


36  Joseph  Massie 

'"  Tln'  iiaiuial  \'alue  of  ^[oney,  as  it  is  apt  to  yield  such  an 
"yearly  Incoinc  hy  Interest,  depends  on  the  wliole  Quantity 
"of  the  then  jjassing  ]\roncy  of  the  Kingdom,  in  ])roportion  to 
"  the  whole  Trade  of  the  Kingdom,  i.  e.  the  general  Vent  of 
"all  the  Commodities,  (Extract.  12.)" 

As  the  second  of  these  Positions  contains  nothing  but  what 
is  comprehended  in  the  third,  they  might  all  three  be  con- 
36  6idered  as  one  only;  but  since  Mr.  ||  Locke  has  introduced  the 
Necessity  of  there  being  so  much  ]\Ioney  in  a  Country  as  will 
bear  a  certain  Proportion  to  the  Trade  of  it,  I  think  it  will  be 
necessary  to  consider  this  Matter  seperately;  for  though  it  may 
be  said  he  has  fixed  the  Proportion,  yet  it  is  so  done,  that  I 
believe  no  Man  will  from  thence  be  able  to  find  out  what  Sum 
of  Money  will  be  sufficient  to  manage  the  Trade  of  this,  or, 
of  any  other  Country;  for  either  two,  four,  eight,  or  sixteen 
^Millions,  will  do  equally  well,  according  to  the  Eules  he  has 
laid  down,  which  ai'e  as  follow,  (Extract  7.) 

Less  than  one  fiftieth  Part  of  the  Labourer's  Wages,  one 
fourth  Part  of  the  Landholder's  yearly  Eevenue,  and  one 
twentieth  Part  of  the  Broker's  yearly  Eeturns  in  ready  Money, 
cannot  well  be  thought  sufficient  to  drive  the  Trade  of  any 
Country ;  but  it  cannot  be  imagined  that  less  than  one  Moiety 
of  this  can  be  enough  to  move  the  several  Wheels  of  Trade, 
and  keep  up  Commerce  in  that  Life  and  thriving  Posture 
it  should  be,  and  how  much  the  ready  Cash  of  any  Country  is 
short  of  this  proportion,  so  much  must  the  Trade  be  impaired 
and  hindered  for  Want  of  Money. 

Which  of  these  Computations  comes  nearest  to  Truth,  I  will 
not  undertake  to  determine,  as  Mr.  Locke  himself  has  not  done 
it,  nor  is  it  material,  but  as  one  of  them  must  be  fixed  on,  I 
shall  take  the  former. 

The  Eule  says,  less  tlian  one  fiftieth  Part  of  the  Labourer's 
Wages,  one  fourth  Part  of  the  Landholders  yearly  Eevenue, 
and  one  twentieth  Part  of  the  Broker's  yearly  Eeturns  in 
ready  ^loney,  cannot  well  be  thought  sufficient  to  drive  the 
Trade  of  any  Country;  and  the  Conclusion  which  follows,  is, 


The  N'atur.vl  Eate  of  Interest  37 

that  how  miicli  the  ready  Cash  of  any  Country  is  short  of  this 
Proportion,  so  much  ||  the  Trade  be  impaired  and  hindered 37 
for  want  of  ]\roney. 

I  should  be  glad  to  know,  what  the  fiftieth  Part  of  the 
Labourer's  Wages,  the  fourth  Part  of  the  Landholder's  yearly 
Eevenue,  and  the  twentieth  Part  of  the  Broker's  yearly  Re- 
turns, are;  as  the  Money  they  came  to,  must  either  be  a  fixed 
and  invariable  Sum,  or  it  will  be  impossible  to  find  out  by 
them,  what  Quantity  of  Money  will  drive  the  Trade  of  any 
Country;  for  if  they  vary,  as  every  Man  knows  they  do,  the 
Proportion  of  Money  which  is  to  be  determined  by  them,  will 
vary  also;  and  consequently  the  Kule  will  not  enable  one  to 
find  out  how  much  Money  will  answer  the  Purposes  of  Trade. 

The  fiftieth  Part  of  a  Labourer's  Wages,  may  at  one  Time 
be  Is.  Sd.  at  another  2  s.  6d.  at  a  third  os.  and  at  a  fourth  10s. 
and  so  of  the  Landholder  and  Broker;  and  this  or  something 
near  it,  has  been  the  Case  in  this  Country  in  different  Ages, 
as  appears  by  Bishop  Fleetwood's  Chronicon  Preciosum^ :  If 
therefore,  according  to  Mr.  LocJce's  Rule,  we  are  to  make 
Inquiry  what  Sum  of  Money  will  be  suflBcient  to  carry  on  the 
Trade  of  Great-Britain,  the  Answer  will  be,  either  two,  four, 
eight,  or  sixteen  Millions  of  Money;  supposing  that  when  the 
fiftieth  Part  of  the  Labourer's  Wages  was  Is.  3d.  there  were 
two  Millions  of  Money  current  here,  and  that  the  Number  of 
People,  and  Quantity  of  Trade  were  the  same  at  all  those 
different  Periods,  which  must  be  admitted  as  well  for  him  as 
me,  though  the  Fact  was  otherwise. 

Proportion  and  Disproportion  between  the  Money  and 
Trade  of  a  Country,  are  Things  we  may  talk  of,  but  it  is  to 
very  little  Purpose :  For  the  Value  of  Money  as  an  exchange- 
able Commo  II  dity,  rising  and  falling  according  as  its  Quan-38 
tity  alters,  a  greater  Sum  of  it  will  do  nothing  in  the  Payment 
of  Labourer's  Wages,  Landholder's  yearly  Revenues,  or 
Broker's  trading,  when  Money  is  plenty,  but  what  a  lesser 
Sum  will  do  as  well  when  it  is  scarce;  and  consequently  there 
is  no  saying  where  Proportion  ends,  or  Disproportion  begins, 
in  this  Case. 


38  Joseph  Massie 

If  Gold  and  Silver  would  either  feed  or  cloath  Men,  a  cer- 
tain and  determinate  Quantity  of  them  would  always  be 
wanted;  and  if  the  Quantity  to  be  had  differed  from  it,  there 
would  undoubtedly  be  a  Disproportion;  but  Gold  and  Silver 
will  neither  do  the  one  nor  the  other,  nor  answer  any  Purpose 
as  Money  to  which  a  certain  Quantity  of  tliem  is  essential;  a 
Farmer  who  now  a  Days  receives  four  Shillings  for  a  Bushel 
of  Wheat,  has  no  Advantage  from  selling  it  at  this  Price, 
more  than  what  a  Farmer  who  lived  two  hundred  Years  ago, 
had  from  selling  his  Bushel  of  Weat  for  two  Shillings;  (sup- 
posing there  was  then  so  little  Money  in  the  Nation,  as  to 
make  Wheat  two  Shillings  a  Bushel)  for  at  that  Time,  two 
Shillings  would  go  as  far,  in  paying  Labourers  Wages,  Rent 
of  Land,  or  in  providing  a  Man  with  Meat,  Drink,  or  Cloaths, 
as  four  Shillings  will  now.  It  cannot  therefore  be  justly  said, 
there  is  no  want  of  Money  to  carry  on  the  Trade  of  the  Nation 
at  present,  because  there  is  twice  as  much  current  now,  as  there 
was  two  hundjed  Years  ago;  or  that  there  was  a  Want  of 
Money  then,  because  there  was  only  half  as  much  current  as 
there  is  now;  the  Truth  is,  that  the  then  Inhabitants  of  this 
Island  either  did,  or  might,  carry  on  as  much  home  Trade  with 
eight  Millions  of  Money,  as  the  present  Inhabitants  of  it  can 
now  carry  on  with  sixteen  Millions;  and  to  say  otherwise,  is 
39  to  deny  ||  that  the  Value  of  Money,  as  an  exchangeable  Com- 
modity, is  governed  by  its  Quantity. 

As  to  foreign  Trade,  there  is  little  occasion  for  having 
Eecourse  to  it  in  an  Inquiry  of  this  Sort;  since,  according  to 
Sir  William  Petty's  Account,^  the  foreign  Trade  of  this  Nation 
scarcely  makes  a  Sixth  Part  of  its  whole  Trade ;  so  that  what  is 
true  of  home  Trade,  may  be  said  to  be  true  of  the  whole,  as 
it  is  so  of  by  far  the  greatest  Part ;  and  upon  Enquiry  it  will 
be  found,  that  this  Nation,  with  only  eight  Millions  of  Money, 
would  have  more  foreign  Trade  than  with  sixteen  Millions; 
and  whoever  thinks  otherwise,  might,  with  as  much  Reason 
think  that  making  our  Commodities  cheaper,  would  not  in- 
crease the  Demand  for  them  abroad. 


The  Xatural  Eate  of  Interest  39 

The  next  Thing  to  be  inquired  into,  is,  whether  the  natural 
Eate  of  Interest  in  a  Country,  depends  on  the  whole  Quantity 
of  the  then  passing  Money  in  it,  in  Proportion  to  the  whole 
Trade  of  it;  or,  in  other  Words,  whether  Interest  does,  and 
necessarily  must,  rise  and  fall  in  a  Country,  in  Proportion  as 
the  Quantity  of  current  ]\Ioney  in  such  Country  diminishes 
or  increases  in  respect  of  the  Trade  of  it;  for  this  is  what  Mr. 
Locke  in  effect  says,  {Extract  12)  in  the  following  Words, 
"  But  that  which  causes  increase  of  Profit  to  the  Borrower  of 
"  Money,  is  the  less  Quantity  of  Money  in  proportion  of  Trade, 
"  or  to  the  Yent  of  all  Commodities  taken  together,  and  vice 
"  versa."  And  this  he  lays  down  as  a  constant  and  general 
Eule ;  for  in  the  same  Extract  he  says,  "  That  though  any 
"  single  Man^s  jSTecessity  and  Want  of  Money,  being  known, 
"  may  make  him  pay  dearer  for  it;  yet  this  is  but  a  particular 
"  Case,  that  does  not  at  the  same  Time  alter  this  constant  and 
"general  Eule."  ||  40 

The  Method  which  Mr.  Locl-e  has  made  use  of  for  determin- 
ing whether  the  Money  in  a  Country  increases  or  diminishes 
in  respect  of  the  Trade  of  it,  by  the  Price  of  Wheat,  I  agree 
with  him  in  thinking  is  the  best,  for  the  Eeasons  he  has  given 
(See  Extract  11  and  13)  and  for  another  Eeason  which  has 
started  up  since  his  Time,  and  this  is,  a  great  Increase  of 
Taxes,  which  have  very  much  raised  the  Prices  of  Commodities 
in  general,  but  have  affected  none  less  than  the  Price  of  Wheat, 
which  neither  has  any  immediate  Tax  on  it,  nor  is  much  in- 
fluenced by  the  Taxes  on  other  Commodities ;  and  therefore  is 
the  most  proper  to  shew  how  far  the  Quantity  of  ]\Ioney  in 
this  Nation  has  altered  with  respect  to  the  Trade  of  it;  for 
there  is  no  other  Commodity  of  such  general  iise  as  Wheat, 
which  has  been  so  little  altered  by  Taxes.  But  the  Misfortune 
is,  that  the  Price  of  it  has  not  been  collected  for  so  long  a 
Series  of  Years  as  I  could  wish. 

Bishop  Fleetwood  has  given  the  true  Market  Price  of  it  for 
only  sixty  successive  Years,  commencing  1646,  and  ending 
1705 :  He  has  indeed  given  the  Prices  of  it  at  different  Times 


40  Joseph  Massie 

for  about  500  Years  before  that  Interval;  but  wliocver  observes 
the  great  Interruptions  or  Variations  which  there  are  in  them, 
will  I  believe  conclude  they  are  of  very  little  Service  to  the 
present  Purpose:  There  is  only  one  Part  of  them  which  can 
safely  be  quoted  to  shew  the  then  Value  of  Money  by  the  Price 
of  Wheat:  and  this  for  about  ten  Years  between  1444  and 
1460,  in  which  it  Avas  neither  very  scarce  nor  very  plentiful; 
and  though  the  Houses  of  Yorlc  and  Lancaster  were  then  at 
War,  and  there  are  some  Interruptions  of  Time,  yet  as  they 
are  but  small  ones,  I  tliink  this  may  be  admitted  into 
41  account.  1 1 

The  Price  of  Wheat  for  about  twenty  Years  last  past  I  have 
collected;  it  is  not  so  correct  as  I  could  wish,  but  it  is  near  the 
matter;  so  that  though  we  cannot  from  these  Materials  find 
out  every  successive  Alteration  which  there  has  been  in  the 
Value  of  Money  for  the  last  300  Years,  we  may  nevertheless 
know  the  Value  of  it  at  five  different  Periods,  which  will  be 
sufficient,  as  all  the  Alterations  which  are  known  to  have  been 
in  the  natural  Eate  of  Interest  in  England  come  within  that 
Term. 

The  Price  of  Wheat  per  Quarter,  at  a  medium,  for  ten 
years  between  1444  and  1460  by  Bishop  Fleetwood's  Account, 
was  six  Shillings  and  three  pence,  wliicli  sum  of  the  Money 
then  coined,  was  intrinsically  worth  Twlve  Shillings  and  one 
Penny  of  our  present  Money,  according  to  Martin  Follces 
Esquire's  Account,"  in  his  Table  of  English  Silver  Coins,  who 
makes  the  Value  of  the  then  nominal  Pound  Sterling,  to  be  to 
that  of  the  present  one,  as  1.937  to  1.000. 

The  Price  of  Wheat  per  Quarter  at  a  Medium  of  twenty 
Years  commencing  1646,  and  ending  1665,  was  21.  IT5.  hd.j^ 
of  the  ]\roney  then  coined,  which  was  exactly  of  the  same  Value 
as  our  present  Money;  there  having  been  no  Alteration  in  the 
nominal  pound  Sterling  since  the  forty  third  ycai-  of  the  Eeign 
of  Queen  Elizaheth. 

The  price  of  it  at  a  medium  of  twenty  years  beginning  1666 
and  ending  1685,  was  "?  /.  Os.  SJ.f  per  Quarter. 


The  Natural  TJate  of  Interest  41 

The  price  of  it  for  the  third  twenty  Years,  from  1686  to 
1705,  upon  an  Average,  was  2  /.  5s.  9d.^  prr  Quarter. 

And  tlie  price  of  it  at  Bear  Key  for  twenty  years  last  past, 
has  been  at  a  Medium  rather  less  than  1  I.  8s.  %d.  per  Quarter, 

These  being  the  prices  of  Wheat  for  the  several  ||  Intervals  43 
of  time  beforementioned,  we  have  from  them  the  proportions 
which  the  Quantity  of  current  Money  in  the  Nation  has  borne 
to  the  Trade  of  it, 

fl7-i  rl444->|      ri460^ 

20 !  1646  1665 

ForJ  20  l^Years  fromJ  loge  UoJ  iggS  )- 


20  1686  1705 

UoJ  ll720J        Ll748J 

How  far  the  Eate  of  Interest  at  these  several  Intervals  has 
agreed  with  Mr.  Locke's  rule,  will  be  very  obvious  from  the  fol- 
lowing Table;  wherein  I  have  inserted  the  legal  Eate  of  In- 
terest, and  also  the  natural  Kate  of  it,  which  I  have  supposed 
to  be  one  per  Cent,  lower  as,  it  seems  impossible  to  fix  it 
exactly;  for  even  at  present,  there  is  so  much  difference  be- 
tween the  Eates  of  Interest  paid  by  private  People ;  and  there 
may  probably  in  Times  past  be  Instances  of  greater  differences, 
but  it  is  reasonable  to  think  they  are  equalled  by  Numbers, 
having  paid  the  legal  Eate,  (I  mean  by  Agreement,  and  not 
by  the  Force  of  Law,)  so  that  if  we  take  it  in  general,  one 
per  Cent.  Difference  will  be  near  the  Truth,  for  the  legal  Eate 
has  been  made  to  follow  the  natural  one.  In  this  Table  I  have 
likewise  inserted  the  Eate  at  which  natural  Interest  should 
have  been,  if  it  had  risen  and  fallen  in  proportion  as  the 
Quantity  of  Money  altered  in  respect  of  the  Trade  of  the 
Nation.  And  I  think  it  will  be  necessary  here  to  mention,  the 
result  of  an  Inquiry  I  made,  in  order  to  know  whether  the 
decrease  of  Money  in  proportion  to  Trade,  indicated  by  the 
Fall  in  the  Price  of  Wheat,  was  confirmed  by  any  other  Com- 
modity of  constant  and  general  Use,  and  little  Influenced  by 
Taxes;  and  I  find  it  is  confirmed  by  the  Price  of  Barley,  ||  43 
which  has  decreased  for  a  hundred  Years  last  past,  and  nearly 
in  the  same  Proportion  as  that  of  Wheat  has  done;  and  this 


42 


Joseph  Massie 


witli  what  Mr.  Locke  has  said,  appear  to  me  sufficient  Reasons 
for  tliinking  tliis  fall  in  the  Price  of  Wheat  is  at  least  princi- 
pally, if  not  intirely  owing  to  a  decrease  in  the  Quantity  of 
Current  Money  in  proportion  to  Trade;  which  however  un- 
willing any  one  may  be  to  believe,  I  cannot  see  Reasons  to 
doubt;  for  if  it  was  owing  to  there  being  but  little  Money  in 
the  Nation,  that  Wheat  sold  for  several  Hundred  Years  at 
three,  six,  nine,  and  twelve  Shillings  a  Quarter,  (which  I 
never  yet  heard  any  one  dispute)  it  must  be  owing  to  there 
being  more  Money  a  hundred  years  ago  in  proportion  to  Trade, 
that  Wheat  sold  dearer  at  that  time,  than  it  has  since  done; 
or  the  Value  of  Money  as  an  exchangeable  Commodity  cannot 
be  governed  by  its  Quantity;  which  I  believe  no  one  will  assert, 
or  say  it  is  so  in  respect  of  Wheat  and  Barley,  when  past 
experience  has  shewn,  these  Comodities  as  well  as  others,  sold 
dearer  for  several  Hundred  Years  as  as  the  Quantity  of  Money 
increased;  and  it  should  be  remember'd  that  so  far  as  the 
Value  of  Wheat  depends  upon  Labour,  and  the  Expence  of 
living,  it  ought  to  be  dearer  now  than  it  was  a  Hundred  Years 
ago,  by  as  much  as  Taxes  and  Fashion  have  raised  the  Price 
of  living  to  Labourers  and  Farmers  since  that  Time,  above 
44  what  the  Quantity  of  Money  would  make  it.  |1 

A  TABLE  OF  RATES  OF  INTEREST,  AND  PRICES  OF  WHEAT. 


The  Value  of  Money  as  an 
exchangeable  Commod- 
ity, or  its  Proportion  to 
Trade,   determined   by  ^egal  Rate  of 
Interest    at 
the  different 
Intervals. 


the  Price  of  Wheat. 


Year  from  and 
to  which  the 
Price  is  tak- 
en at  a  Me- 
dium. 


1444  to  1460 

1646  to  1665 
1666  to  1685 
1686  to  1705 
1729  to  1748 


Price  in 
present 
Money. 


1.  8.  d. 

Q  ^2  1       Not  fixed  by 
Law. 


2  17  5^V 
2  6  3Ji 
2  5  9% 
1     8  6 


Natural  Rate 
of  Interest 
at  the  differ- 
ent Inter- 
vals. 


Supposed  to 

be  about 
10  per  Cent. 

7 
5 
5 
4 


If  the  Proportion 
which  Money  has 
borne  to  Trade  for 
20  Years  last  past 
was  the  Reason  why 
natural  Interest  has 
been  i  per  Ct.  it 
should,  according 
to  Mr.  Locke's  Rule, 
have  altered  as  fol- 
lows. 


9K 
2 

4 


The  ISTatural  Rate  of  Interest  43 

From  this  Table  it  appears,  that  if  the  Proportion  which 
Money  here  has  borne  to  Trade  for  twenty  Years  last  past  was 
the  Eeason  why  natural  Interest  has  been  four  per  Cent,  the 
natural  Eate  of  it  for  forty  Years  from  1666  to  1705  ought  to 
have  been  only  two  and  a  half  per  Cent,  according  to  the 
Proportion  which  Money  bore  to  Trade  for  that  time,  whereas 
it  was  double  the  Sum;  by  the  same  Eule,  natural  Interest 
from  1646  to  1665  should  have  been  only  two  per  Cent,  and  it 
was  in  Fact  about  seven  per  Cent.  From  1444  to  1460  it 
ought  to  have  been  nine  and  a  half  per  Cent,  which  comes 
within  half  per  Oent.  of  the  supposed  Eate  of  that  Time,  for 
it  was  never  regulated  by  Law  till  the  thirty  seventh  of  Henry 
VIII.  but  this  will  not  prove  the  Eule  to  be  true,  even  though 
we  admit  ten  or  nine  and  a  half  per  Cent,  was  the  actual  Eate 
of  Interest  during  that  Interval,  for  if  the  ||  then  Agreement  45 
of  the  Eate  of  Interest  with  the  Eule,  was  the  necessary  Con- 
sequence of  the  Proportion  which  Money  then  bore  to  Trade, 
it  could  never  have  varied  from  it,  in  the  Manner  it  has  done, 
during  the  other  Intervals,  in  which  it  neither  agreed  nor  kept 
any  Sort  of  Correspondence  with  the  Eule;  but  on  the  con- 
trary fell  gradually  for  a  Hundred  Years,  whilst  the  Propor- 
tion of  Money  to  Trade  was  Decreasing ;  and  instead  of  being 
double  the  Eate  now,  that  it  was  a  Hundred  Years  ago,  it  is  only 
about  half  as  much  as  it  was  then,  and  this  I  think  undeniably 
proves  Mr.  Lodge's  Eule  is  wrong;  and  had  he  been  as  par- 
ticular in  his  arguments  to  prove  or  support  it,  as  he  has  been 
in  proving,  that  the  Value  of  Money  as  an  exchangable  Com- 
modity depends  upon  the  Proportion  its  Quantity  bears  to 
Trade,  he  would  have  found  his  Eule  contradicted  by  the 
Alterations  in  Money  and  Interest  that  came  within  the  Time 
which  he  himself  speaks  of :  And  this  is  the  Eeign  of  Queen 
Elizabetli,  and  the  Time  he  wrote;  for  Extract  sixteen  he  says, 
there  never  was  brought  into  England,  so  great  an  Increase  of 
Wealth  since,  as  in  Queen  Elizabeth's,  King  James  I.  and  King 
Charles  Ist's.  Time;  and  this  is  confirmed  by  the  Price  of 
Wheat  in  the  last  of  those  three  Eeigns,  for  it  has  never  sold 


44  Joseph  Massie 

for  so  iniuli  ^loiiov  siiKo ;  lie  iilso  s])e;ik!^  of  Money  being  scarce 
\vlien  he  wrote,  and  llie  l*rice  of  Wheat  at  that  Time  shews, 
there  was  then  less  Money  in  the  Nation  in  I'roportion  to 
Trade,  tlsan  tliere  was  fifty  Years  before. 

And  during  this  Interval  the  natural  Rate  of  Interest  fell 
about  two  per  Cent,  so  that  if  Mr.  Locke  had  considered  these 
Facts,  and  compared  his  Eule  with  them,  he  would  have  found 
it  was  not  true.  And  there  is  another  method  by  which  the 
46  Rule  might  have  been  tried,  which  would  ||  have  given  great 
Room  to  doubt  the  Truth  of  it,  and  this  is,  by  inquiring  what 
the  Rate  of  Interest  must  have  been  for  some  Hundred  Years 
backwards,  if  it  depended  upon  the  Proportion  of  Money  to 
Trade :  for  if  the  Quantity  of  Money  which  made  Wheat  2  /. 
175.  hd.  per  Quarter  upon  an  Average  of  twenty  Years,  made 
natural  Interest  seven  per  Cent,  it  must  have  been  fourteen 
per  Cent,  when  Wheat  Sold  for  1  I.  85.  8^.^  per  Quarter.  At 
twenty-eiglit  per  Cent,  vrhen  Wheat  sold  for  I.  14s.  ■id^  and 
fifty  six  per  Cent,  when  Wheat  was  7'.s.  2d.  and  a  Hundred  and 
twelve  per  Cent,  when  Wheat  was  2s.  7d.  per  Quarter;  and  it 
has  sold  for  less  Money  since  the  Conquest;  and  yet  no  one 
can  imagine  any  Man  ever  paid  112  /.  for  the  Use  of  100  I.  for 
a  Year;  or  tliat  Interest  was  ever  so  liigh  as  fifty  six  or  twenty 
eight  per  Cent. 

Whether  Mr.  Locl-e  Avould  Imve  applied  this  Rule  in  the 
manner  I  have  here  done,  or  not,  I  Avill  not  venture  to  say,  but 
I  cannot  think  of  any  other  way  to  apply  it,  for  he  says,  the 
Rate  of  Interest  depends  on  the  whole  Quantity  of  current 
Money  in  Proportion  to  Trade ;  and  if  so.  Interest  must  alter 
as  this  Proportion  changes;  and  if  it  alters,  it  must  either 
alter  equally  witli  Money  as  above;  or  else  unequally,  and  then 
I  would  be  glad  to  know,  what  the  degree  of  Inequality  is,  and 
how  it  is  found,  as  I  cannot  at  pi'csent  see  any  Reason  for  its 
being  one  more  than  another.  But  this  is  of  no  Consequence 
here;  as  Experience  has  shewn,  the  natural  Rate  of  Interest 
neither  alters  equally  nor  unequally  with  the  Quantity  of 
Money  in  respect  of  Trade,  nor  has  any  Dependence  on  the 


The  Xatural  IJate  of  Intkukst  45 

Proportion  which  the  Money  of  a  Country  bears  to  the  Debts 
of  its  Inhabitants  one  amongst  another,  it  will  therefore  be 
necessary  to  ||  find  other  Rules  than  these  to  Account  for  the  47 
Eate  of  Interest,  as  it  is  plain  they  don't  govern  it ;  and  this  is 
what  I  shall  now  endeavour  to  do. 

ON  THE  GOVERNING  CAUSES  OF  THE  NATURAL 
RATE  OF  INTEREST. 

In  order  to  find  out  the  Causes  on  which  the  natural  Eate  of 
Interest  depend,  I  think  it  will  be  necessary  to  consider  what 
the  Eeasons  for  paying  Interest  are,  as  this  seems  to  me  to  be 
the  most  natural  and  certain  method  of  Inquiry  in  the  present 
Case,  for  when  we  know  the  Foundation  upon  which  Interest 
is  built,  w^e  shall  be  the  better  able  to  determine  what  gov- 
erns it. 

And  first,  of  the  Eeasons  for  paying  Interest.  As  the  Pro- 
prietor of  any  Commodity  has  undoubtly  the  same  Eight  to  all 
the  Advantages  it  is  capable  of  affording,  as  he  has  to  tlie  thing 
itself,  it  is  certain,  that  whoever  he  transfers  any  of  these 
Advantages  to,  is  as  much  under  an  Obligation  to  him,  as  if 
tlie  Proprietor  had  given  him  the  Commodity  from  whence 
they  arise;  because  things  are  no  otherwise  Valuable,  than  as 
they  are  Useful,  and  he  who  has  Benefited  by  the  Use  or  Pos- 
session of  any  thing,  may  be  justly  said  to  have  received  Part 
of  the  Yalue  of  it,  and  Consequently  to  be  in  Debt  on  this 
Account  to  the  Person  to  whom  of  Eight  the  thing  belongs. 

Thus,  he  v,'ho  borrows  100  I.  in  Money  of  his  Neighbour  for 
a  Year,  by  the  Use  of  which  in  Trade  or  otherwise  for  that 
Time,  his  Neighbour  could,  and  he  may,  make  a  Profit  of  5  /. 
over  and  above  paying  for  all  the  Trouble  and  Eisque  produced 
thereby;  is  as  much  105  /.  in  his  ||  Neighbour's  Debt,  as  he 48 
would  have  been  if  he  had  actually  borrow'd  so  much  Money  of 
him,  and  paid  it  again  immediately  after  it  was  Borrow'd; 
for  though  in  one  Case  he  receives  105  /.  and  in  the  other  only 
100  /.  yet  by  having  the  Use  of  the  latter  Sum  for  a  Year,  he 
gains  5  I.  more  than  he  has  a  Eight  to,  which  is  in  Effect  the 


-^ 


46  Joseph  Massie 

same  tiling,  as  though  he  had  receiv'd  so  much  more  from  his 
Neighbour ;  because  this  5  I.  really  belongs  to  him,  as  much  as 
the  100  I.  does,  by  the  Use  of  which  it  was  gained ;  and  Con- 
sequently he  ought  to  be  paid  tlie  one  as  well  as  the  other. 

By  the  same  Rule,  if  Peter  borrows  one  hundred  Quarters 
of  Wheat  from  James  for  a  Year,  and  employs  it  in  Trade  or 
otherwise,  with  as  much  Advantage  as  before-mentioned,  he 
is  as  really  one  hundred  and  five  Quarters  of  Wheat  in  Jame's 
Debt  at  the  Year's  End,  as  the  other  Man  was  105  l.  in  his 
Neighbour's  Debt,  tho'  he  borrow'd  only  100  I.  from  him ;  nor 
would  it  make  the  Claims  of  the  Lenders  for  105  I.  in  Money, 
or  one  hundred  five  Quarters  of  Wheat,  at  all  less  just,  if  the 
Borrowers  should  not  be  able  to  make  the  supposed  Profit,  nor 
even  any  Profit  at  all  by  the  Money  or  the  Wheat;  for  the 
Lenders  having  it  actually,  or  at  least  apparently,  in  their 
Power,  to  make  a  clear  Profit  of  5  per  Cent,  by  those  Com- 
modities, had  a  Eight  to  demand  such  a  Praemium  for  them 
from  the  Borrowers,  who,  if  they  had  got  above  5  per  Cent. 
neither  would,  nor  ought  to  have  paid  more  than  they  agreed 
for,  and  therefore,  though  they  should  not  get  so  much,  they 
ought  nevertheless  to  abide  by  their  Agreement. 

What  has  been  said  of  Money  and  Wheat,  is  equally  applic- 
49  able  to  all  other  Commodities,  ||  which  are  capable  of  pro- 
ducing Profit  to  a  Borrower,  by  the  consumption,  LTse,  or  Pos- 
session of  them ;  and  it  is  equally  applicable  to  those  who  bor- 
row through  Necessity,  and  without  any  View  or  Intention  of 
Gain ;  for  a  Man's  wanting  ]\Ioney  or  Wheat  to  feed  his  Extrav- 
agance, or  supply  his  present  Necessity,  is  not  a  Reason  why 
they  who  can  provide  him  with  either,  are  not  to  take  Interest 
for  them,  any  more  than  it  is  for  their  not  having  their  Princi- 
pal returned,  as  Lenders  have  the  same  Right  to  the  one  as 
the  other;  for  the  Equitableness  of  taking  Interest,  depends 
not  upon  a  Man's  making  or  not  making  Profit  by  what  he 
borrows,  but  upon  its  being  capable  of  producing  Profit  if 
rightly  employed.  It  cannot  therefore  be  difficult  to  deter- 
mine what  the  natural  Rate  of  Interest  immediately  depends 


y 


The  Natural  Eate  of  Interest  47 

on;  for,  if  that  which  Men  pay  as  Interest  for  the  Use  of  what 
they  borrow,  be  a  Part  of  the  Profits  it  is  capable  of  producing,  )r' 
this  Interest  must  always  be  govern'd  by  those  Profits. 

And  daily  Experience  shews  is  it  so,  for  the  Question  which 
naturally  arises  in  every  Man's  Breast,  when  he  either  lends 
or  borrows,  is,  what  can  be  got  by  the  Thing  lent  or  borrow'd  ? 
If  it  be  a  great  deal,  Season  tells  him  he  ought  to  receive  or 
pay  a  high  Eate  of  Interest  for  the  Use  of  it;  if  only  a  little, 
that  he  ought  to  receive  or  pay  only  a  low  Eate  of  Interest  for 
it :  and  the  only  Thing  which  any  Man  can  be  in  doubt  about  on 
this  Occasion,  is,  what  Proportion  of  these  Profits  do  of  Eight 
belong  to  the  Borrower,  and  what  to  the  Lender;  and  this 
there  is  no  other  Method  of  determining,  then  by  the  Opinions 
of  Borrowers  and  Lenders  in  general ;  for  Eight  and  Wrong  in 
this  Eespect,  are  only  what  common  Consent  makes  so.  Mr. 
ivocfce  II  says,  (Extract  4th)  They  divide  the  Profits  equally  50 
between  them,  which,  I  believe,  is  generally  the  Case;  and  if 
so,  the  equitable  Division  of  Profits  made  by  the  Use  of  Things 
borrowed,  is,  that  Lenders  should  have  one  half,  and  Borrowers 
the  other. 

This  Eule  of  dividing  Profits  is  not  bowever  to  be  apply'd 
particularly  to  every  Lender  and  Borrower,  but  to  Lenders  and 
Borrowers  in  general;  for  one  Man's  having  such  remarkable 
Skill  in  his  Profession,  as  to  be  able  to  get  double  the  Profit 
by  100  I.  which  others  in  the  same  Way  make,  is  not  a  Eeason 
why  he  should  pay  twice  as  much  Interest  for  it,  any  more 
than  another  Man's  being  so  ignorant  of  his  Business,  as  not  to 
be  able  to  get  above  half  the  common  Profits,  is  a  Eeason  why 
he  should  pay  only  half  the  common  Eate  of  Interest ;  remark- 
ably great  and  small  Gains  are  the  Eewards  of  Skill,  and  the 
Want  of  Understanding,  which  Lenders  have  nothing  at  all 
to  do  with;  for  as  they  will  not  suffer  by  the  one,  they  ought 
not  to  benefit  by  the  other. 

What  has  been  said  of  particular  Men  in  the  same  Business 
is  applicable  to  particular  Sorts  of  Business ;  if  the  Merchants 
or  Tradesmen  employed  in  any  one  Branch  of  Trade,  get  more 


48  Joseph  Massie 

by  what  they  borrow  than  the  comon  Profits  made  by  other 
Merchants  and  Tradesmen  of  the  same  Country,  the  extra- 
ordinary Gain  is  theirs;  though  it  required  only  common  Skill 
and  Understanding  to  get  it,  and  not  the  Lenders  who  sup- 
plyed  them  with  Money :  I  say  it  is  equitably  as  well  as  legally 
the  Propetty  of  the  Borrowers;  for  tlie  Lenders  would  not 
have  lent  their  Money,  to  carry  on  any  Branch  of  Trade  upon 
lower  Terms,  than  would  admit  of  paying  so  much  as  the 
51  common  Eate  of  Interest;  and  therefore  they  ||  ought  not  to 
receive  more  than  that,  whatever  Advantages  may  be  made  by 
their  Money. 

As  it  appears  from  tlie  foregoing  Considerations,  that  In- 
terest is  founded  upon  Profit,  which  common  Consent  seems 
to  have  fixed  the  Division  of,  equally  between  Lenders  and 
Borrowers;  I  think  it  may  safely  be  laid  down  for  a  Eule, 
that. 

The  natural  Rate  of  Interest  is  governed  by  the  Profits  of 
Trade  to  Particulars. 

And  this  I  believe,  will  be  found  true  in  all  civilised  Ages 
and  Countries;  I  make  the  Distinction  of  civilised,  because 
lending  cannot  subsist  unless  Men  have  a  Confidence  in  each 
other,  and  this  it  is  to  be  feared,  would  in  general  be  very 
slender,  without  the  Help  of  Eeligion  and  Laws,  the  latter  of 
which  at  least,  must  be  supposed  to  have  their  proper  Force, 
or  there  can  be  little  lending.  If  then  it  be  asked,  why  In- 
terest was  8  per  cent,  in  England  a  hundred  Years  ago,  and  is 
now  only  4  per  cent,  or  why  it  has  fallen  nearly  in  the  same 
Proportion  in  Holland,  during  that  Interval,  as  it  has  done  in 
England;  the  Answer  to  both  is,  that  Merchants  and  Trades- 
men in  general,  as  well  tliere  as  here,  did  then  get  double  the 
Profits  they  now  make. 

Or,  if  it  be  asked,  why  Interest  which  is  now  about  4  per 
cent,  in  this  Country,  should  not  be  the  same  throughout  all 
trading  Countries,  instead  of  being  three  per  cent,  in  Holland; 
five  and  six  per  cent,  in  France,  Germany  and  Portugal;  seven, 
eight,  and  nine  per  cent,  in  the  West  and  East-Indies,  and 


The  Natural  Eate  of  Ixteeest  49 

from  ten  to  twelve  per  cent,  in  Turkey;  one  general  Answer 
will  do  for  the  whole,  which  is,  that  the  Profits  of  Trade  in  *^ 

x: 

these  several  Countries  differ  from  the  Profits  of  Trade  here,  ' 
and  so  much  as  to  produce  all  those  different  Eates  of  In- 
terest. II  52 

But  we  must  not  stop  here,  for  though  these  are  the  Causes 
which  immediately  govern  the  Eate  of  Interest,  there  are 
superior  ones  which  govern  them,  and  what  they  are  is  next  to 
be  inquired. 

Mr.  Locke  says,  {Extract  12)  "That  which  causes  Increase 
"  of  Profit  to  the  Borrower  of  Money,  is  the  less  Quantity  of 
"  Money  in  Proportion  to  Trade,  or  to  the  Vent  of  all  Com- 
"  modifies  taken  together,  and  vice  versa."  But  this  I  have 
shewn  by  Experience  is  not  true;  for  the  Profits  of  Trade  in 
England  have  been  decreasing  for  one  hundred  Years  last 
past;  tho'  the  Proportion  of  Money  to  Trade,  has  during  that 
Time  been  diminishing,  and  consequently  they  cannot  be 
governed  by  it. 

It-  must  be  owing  to  some  other  Eeason  than  this,  that 
Merchants  and  Tradesmen  in  general  got  16  per  cent.  Profit 
by  Trade  one  hundred  Years  ago,  and  can  now  get  only  8  per 
cent,  and  what  this  Eeason  is,  they  are  likeliest  to  know,  who 
have  been  long  in  Trade,  and  have  suffered  most  by  the 
Change;  for  when  Men  find  an  Alteration  to  their  Disad- 
vantage, they  will  leave  no  Method  untried  to  come  at  the 
Cause  which  produced  it. 

Let  us  inquire  then  of  Merchants  and  Tradesmen,  who  have 
been  many  Years  in  Business,  how  it  happens  that  their  Profits 
are  less  now  than  they  were  when  they  first  set  out  in  the  World, 
and  I  believe  all  or  most  of  them  will  say  it  is  owing  either  to 
an  Increase  of  Traders  or  a  Decrease  of  Trade,  or  to  People 
in  Trade  lowering  the  Prices  of  their  Commodities  upon  each 
other;  which  is  the  certain  Consequence  of  such  Alterations. 
And  when  once  a  Commodity  is  sold  for  less  than  the  cus- 
tomary Profit  by  a  few,  ||  whether  it  be  through  Necessity  to  53 
get  some  Trade,  or  through  Avarice  to  get  most,  others  who 


50  Joseph  Massie 

deal  in  it  must  either  sell  for  the  same  Profit,  or  lose  their 
Customers,  and  this  by  Degrees  will  make  great  Alterations 
in  the  Profits  of  Trade;  for  every  Merchant  or  Tradesman, 
who  begins  Trade  and  does  not  succeed  to  the  Business  left  by 
a  Father,  a  Master,  or  some  other  Person,  must  find  out  some- 
thing to  induce  People  to  give  him  a  Preference,  and  so  must 
he  also  who  grasps  at  more  than  his  Share  of  Trade;  and  this 
is  generally,  selling  some  of  the  Goods  they  deal  in,  cheaper 
than  they  are  Sold  by  others.  And  as  some  such  Avaritious 
Men  must  always  be  expected,  and  all  Branches  of  Trade  must 
have  a  constant  Succession  of  young  Beginners,  and  many  of 
them  have  no  Business  but  what  they  Gain  from  others  by 
Underselling  them ;  it  is  Plain,  that  this  must  have  contributed 
much,  towards  Eeducing  the  Profits  of  Trade  in  General  to 
half  what  they  were  a  Hundred  Years  ago ;  nor  will  it  cease  to 
Influence  them  till  they  are  Reduced  to  their  lowest  Ebb. 

The  general  Profits  of  Trade  are  likewise  liable  to  be  altered 
by  a  Decrease  of  Trade,  as  well  as  by  an  Increase,  or  Change 
of  Traders ;  for  it  is  much  the  same  which  alters,  if  a  different 
Proportion  between  the  one  and  the  other  be  produced  by  the 
Alteration,  for  it  is  this,  and  not  a  Proportional  Increase  or 
Decrease  of  both,  which  Eaises  or  Lowers  the  Profits  of  Trade. 

How  far  a  Decrease  of  Trade  has  contributed  to  reduce  the 
Profits  of  English  Merchants  and  Tradesmen  within  the  Time 
before-mentioned  cannot  exactly  be  determined ;  but  if  we  con- 
54sider,  that  most  of  the  foreign  Trade  in  Europe  a  Hundred  || 
Years  ago,  was  carried  on  by  the  English,  and  Dutch,  and  that 
they  are  now  Eivalled  in  some  respect  or  other  by  the  French, 
Swedes,  Danes,  &c.  we  cannot  conclude  otherwise  of  the  Mat- 
ter, than  that  this  fall  of  Profits  has  been  principally  owing  to 
those  Nations  interfering  with  this,  in  Foreign  Trade;  espe- 
cially if  we  consider  further,  how  most  of  the  Princes  and 
States  in  Europe,  seeing  the  Importance  of  Commerce  by  the 
Increase  of  Power  and  Wealth  of  England  and  Holland,  have 
Endeavoured  to  improve  every  natural  means  of  Trade,  that 
they  may  have  the  less  Occasion  for  the  Commodities  of  other 


The  Natural  Rate  of  Interest  51 

Countries,  or  be  able  to  purchase  them  upon  Terms  less  Dis- 
advantageous to  themselves. 

These  I  take  to  be  the  chief  Causes  which  have  reduced  the 
Profits  of  Trade  in  general  within  a  Hundred  Years  last  past ; 
and  to  these  may  be  added  a  third,  which  though  far  less  con- 
siderable yet  I  think  it  has  contributed  something  to  the 
change;  and  this  is  the  East-India  Trade,  which,  as  it  is  now 
carried  on,  is  advantageous  to  this  and  other  Nations,  but  I 
very  much  doubt  its  being  so  to  Europe  in  general.  For  if  the 
Value  {i.  e.  Cost  and  Freight)  of  all  the  unwrought  and  full 
Manufactured  Commodities  sent  to  East-India  by  the  English, 
Dutch,  French,  &c.  falls  short  of  Purchasing  all  the  Com- 
modities brought  from  thence;  which,  from  the  vast  Quanti- 
ties of  Silver  yearly  exported  by  all  the  European  Nations  who 
Trade  there,  over  and  above  what  the  Gold  returned  is  Worth, 
seems  to  be  the  Case;  it  is  certain,  that  though  these  particu- 
lar Nations  may  regain  the  Money  they  parted  with,  yet  the 
Europeans  upon  a  general  Ballance  with  the  East-Indians  are 
losers;  II  because  Europe  contributes  more  to  the  Trade  of  55 
Asia,  than  Asia  does  to  that  of  Europe;  and  the  Difference  is 
so  much  lost  in  the  Quantity  of  Labour  to  the  trading  People 
of  Europe,  many  of  whom  must  by  this  means  remain  a 
burthen  on  their  respective  Countries;  and  the  Labour  so 
lost  be  paid  for  in  Specie  to  the  East-Indians  likewise,  which 
makes  the  Loss  double;  and  thus  it  is  that  the  Riches  of  the 
West-Indies,  are  by  the  trading  Nations  of  Europe  carried  to 
the  East-Indies,  without  Producing  any  Advantages  to  the 
Trade  of  Europe  in  general,  but  on  the  contrary  Disadvan- 
tages: for  every  piece  of  Silk,  or  Stuff  brought  from  East- 
India,  more  than  what  the  Commodities  sent  from  Europe 
will  purchase,  is  so  much  lost  to  the  Manufacturers  of  some 
trading  Country;  for  shift  it  how  you  will,  it  will  certainly 
fix  on  some  of  them,  and  by  Decreasing  the  Proportion  of 
Trade  must  contribute  to  reduce  the  Profits  of  it  as  before- 
mentioned. 

From  what  has  been  said  on  this  Head,  I  deduce  the  follow- 
ing Rule; 


52  Joseph  Massie 

C     .       That  the  Profits  of  Trade  in  general,  are  governed  by  the 
J    Proportion  which  the  Number  of  Traders  bears  to  the  Quan- 
tity of  Trade. 

And  this  is  in  general  confirmed  by  the  fall  of  Interest  in 
the  several  trading  Countries  of  Europe  within  the  last  Hun- 
dred Years,  in  which  the  Number  of  Competitors  for  Foreign 
as  well  as  Domestic  Trade,  has  greatly  increased,  and  by  lower- 
ing the  Profits  of  it,  has  lowered  the  Rate  of  Interest ;  and  if 
we  look  into  the  different  Countries  of  Europe,  it  will  be  found 
that  the  present  Rates  of  Interest  in  them,  and  consequently 
the  Profits  of  Trade,  correspond  with  the  Rule,  for  in  Holland 
56  where  the  Number  of  People  employ'd  in  ||  Trade,  bears  the 
greatest  Proportion  to  the  whole  Number  of  Inhabitants,  of  any 
Country  properly  situated  for  Commerce,  Interest  is  the  low- 
est;! and  in  Great-Britain  which  comes  nearest  to  Holland  in 
this  respect,  the  Rate  of  Interest  comes  nearest  to  that  of 
Holland;  in  France,  Portugal,  Germany,  and  Spain,  where 
there  is  less  Trade  in  proportion  to  the  Numbers  of  People, 
Interest  is  higher  than  it  is  here;  and  in  Turkey,  where  the 
Disproportion  is  still  greater,  Interest  is  higher  than  in  any 
of  the  before-mentioned  Countries. 

As  to  the  Rates  of  Interest  received  and  paid  in  the  different 
Colonies  and  Settlements  in  America,  and  in  the  East  and 
West-Indies,  I  did  not  think  it  proper  to  mention  them  with 
those  already  spoke  of;  not  that  they  contradict  the  Rule  laid 
down,  but  because  they  are  in  general  higher  than  the  Rates 
of  Interest  in  the  different  trading  Countries  of  Europe;  and 
the  Reason  why  they  are,  and  probably  always  will  be  so,  I  take 
to  be  this ;  their  Trade  depends  very  much  upon  Europe,  and 
consequently  is  attended  with  greater  Risks  from  the  Sea,  or 
Change  of  Climate,  or  both,  than  the  Trade  between  Countries 
which  are  not  so  far  distant  from  each  other,  and  therefore  it 
must  either  produce  greater  Profit,  or  Merchants  would  not 
engage  in  it ;  but  Interest  has  nevertheless  fallen  in  those  Parts 
of  the  World,  and  will  continue  to  do  so,  as  the  general  Trade 
of  Europe  is  closer  driven,  though,  for  the  Reason  before- 


The  Natural  Eate  of  Interest  53 

mentioned,  I  think  Interest  must  always  be  higher  in  those 
Colonies  and  Settlements  than  it  is  at  the  same  time  in  the 
Countries  of  Europe  to  which  they  respectively  belong. 

Having  now  shewn  that  the  Profits  of  Trade  are  governed 
by  the  proportion  wliich  the  Number  of  Traders  bears  to  the 
Quantity  of  Trade;  it  will  ||  next  be  necessary  to  find  out  what 57 
governs  the  Proportion  between  Trade  and  Traders,  and  this  I 
apprehend  is  to  be  done  by  considering  what  the  Motives  to 
Trading  are. 

The  first  and  greatest  Motive  to  trade  is  Necessity;  for 
Nature  has  distributed  the  Necessaries  and  Conveniences  of 
Life  in  such  a  manner,  as  makes  it  impossible  for  any  Man  to 
procure  by  his  own  Labour  so  many  of  them  as  are  requisite 
for  his  living  conveniently  and  agreeably;  and  there  is  no 
Method  of  remedying  this  Inconvenience  without  the  Assist- 
ance of  other  People,  but  with  that  it  may  be  done ;  for  Peter 
being  able  to  procure  by  his  own  Industry,  more  of  some  useful 
Things,  and  James  more  of  others,  than  are  required  to  satisfy 
their  respective  Wants :  They  have  it  equally  in  their  Power 
to  furnish  each  other  with  what  their  Labour  falls  short  of 
procuring,  by  exchanging  the  Excess  of  such  Things  as  they 
have,  for  a  Sufficiency  of  those  they  want;  and  this  Inability 
to  subsist  conveniently  by  our  own  Labour,  is  the  first  and 
chief  Motive  to  Trade. 

But  this  is  not  the  only  Inducement  which  Men  have  to 
traffick;  for  if  it  was,  the  Quantity  of  Trade  in  every  Nation 
in  proportion  to  the  Numbers  of  its  Inhabitants,  or  to  its 
natural  Fertility  or  Sterility,  would  be  alike,  which  is  far 
from  being  the  Case;  for  in  some  Countries  human  Life  is 
one  constant  Scene  of  Labour,  and  in  others,  it  is  scarcely  any 
thing  but  Inactivity  and  Indolence,  so  that  one  would  be  apt 
to  think  Nature  had  inspired  one  Part  of  human  Eace  with 
Industry  and  the  other  with  Idleness ;  but  the  Difference  arises 
from  a  lower  Principle,  it  is  Government,  and  not  Nature, 
which  makes  J\Ien  thus  to  differ  from  each  other :  they  labour 
for  the  present  Day  through  Necessity,  but  where  they  extend 


54  Joseph  Massie 

58  their  Cares  to  ||  Futurity,  it  is  from  a  Prospect  of  enjoying 
liereafter  the  Fruits  of  their  present  Industry,  which  they  have 
not  in  all  Places;  and  this  is  the  Eeason,  why  Men  in  one 
Country  are  very  industrious,  in  another  very  lazy,  and  in  a 
third,  neither  remarkable  for  the  one  nor  the  other. 

And  agreeable  to  this,  we  find  by  the  low  Kate  of  Interest 
in  Great-Britain  and  Holland,  where  Government  is  free,  and 
Mens  private  Rights  are  best  preserved,  that  there  are  more 
Traders  in  Proportion  to  the  Numbers  of  People  those  Coun- 
tries contain,  than  there  are  either  in  France,  Portugal,  Ger- 
many, Spain,  or  any  other  Countries  in  Europe,  where  Govern- 
ment is  arbitrary,  and  private  Property  is  less  secure.  So  true 
is  that  excellent  Eemark  of  Sir  William  Temple'^,  That  "  Trade 
"  cannot  grow  or  thrive  to  any  great  Degree,  without  a  Con- 
"  fidence  both  of  publick  and  private  Safety,  and  consequently 
"  a  Trust  in  the  Government,  from  an  Opinion  of  its  Strength, 
"  Wisdom,  and  Justice ;  which  must  be  grounded  either  upon 
"  the  personal  Virtues  and  Qualities  of  a  Prince,  or  else  upon 
"  the  Constitutions  and  Orders  of  a  State."  Observations  on 
the  Netherlands,  p.  190.* 

These  then  are  the  Causes  which  govern  the  Protion  be- 
tween Trade  and  Traders. 

I.  Natural  Necessity, 

II.  Liberty. 

III.  The  Preservation  of  Men's  private  Eights. 

IV.  Publick  Safety. 

I.  Of  Natural  Necessity.  The  necessary  and  useful  Pro- 
ductions of  Nature  are  so  partially  and  unequally  distributed 

59  in  different  Countries,  that  it  |1  is  much  to  be  doubted, 
whether  there  are  any  two  Nations  in  Europe  in  which  an 
equal  Quantity  of  Labour  would  be  required  to  enable  a  certain 
Number  of  People  to  live  with  the  same  Degree  of  Con- 
venience, if  they  were  to  be  confined  to  the  Productions  of  that 
Country  alone,  and  not  receive  any  Helps  from  others,  which 
I  believe  every  one  will  agree  in,  who  considers,  there  are  no 
two  Countries  which  furnish  an  equal  Number  of  the  Neces- 


The  jSTatukal  Rate  of  Interest  55 

saries  of  Life  in  equal  Plenty,  and  with  the  same  Quantity  of 
Labour;  and  that  Mens  Wants  increase  or  diminish  with  the 
Severity  or  Temperateness  of  the  Climate  they  live  in :  And 
consequently,  the  Proportion  of  Trade  which  the  Inhabitants 
of  different  Countries  are  obliged  to  carry  on  through  Neces- 
sity, cannot  be  the  same,  nor  is  it  practicable  to  ascertain  the 
Degree  of  Variation  further  than  by  the  Degrees  of  Heat  and 
Cold;  from  whence  one  may  make  this  general  Conclusion, 
that  the  Quantity  of  Labour  required  for  the  Maintenance  of 
a  certain  number  of  People  is  greatest  in  cold  Climates,  and 
least  in  hot  ones ;  for  in  the  former,  Men  not  only  want  more 
Cloaths,  but  the  Earth  more  cultivating,  than  in  the  latter, 
where  they  have  little  Occasion  for  Cloaths,  and  may  often  be 
said  to  wear  them  more  for  Decency  and  Fashion,  than 
through  ISTecessity:  And  where  the  voluntary  Productions  of 
Nature  are  so  great,  that  the  Cultivation  of  Land  is  much  less 
necessary.  Thus  for  Example,  those  who  live  in  the  South 
Part  of  Europe  can  support  themselves  with  less  Labour,  than 
those  who  inhabit  the  middle  Part  of  it,  and  these  can  subsist 
with  less  Labour  than  the  Inhabitants  of  the  North  Part  of  it. 
And  now  I  am  speaking  of  Necessity  obliging  some  People  to 
trade  more,  and  others  less,  I  cannot  omit  mentioning  ||  one  60 
kind  of  Necessity  which  is  peculiar  to  Holland,  and  this  arises 
from  the  Country  being  over-peopled;  which,  with  the  great 
Labour  required  to  fence  and  drain  their  Land,  makes  their 
Necessity  to  trade  greater  than  it  is  in  any  other  Part  of  the 
habitable  World. 

II.  Of  Liberty.  The  Influence  which  the  Enjoyment  of 
Liberty  has  over  Commerce,  may  in  general  be  seen  by  such 
free  Countries  as  are  well  situated  for  Commerce,  having  the 
most  Trade  in  proportion  to  their  Numbers  of  Inhabitants; 
but  if  we  would  see  its  greatest  Effects,  we  must  look  into 
Holland,  which,  from  the  natural  Quality  of  its  Soil,  and  the 
Lowness,  and  consequently  Unhealthiness  of  its  Situation, 
is  not  a  desirable  Country;  and  yet  so  sweet  is  Liberty,  that 
!Men  chuse  rather  to  live  on  this  free  Spot,  and  submit  to  all 


56  Joseph  Massie 

the  natural  Inconveniences  and  Disadvantages  it  lies  under, 
than  go  where  Nature,  but  not  Liberty  smiles. 

III.  Of  the  Preservation  of  Men's  private  Rights.  As  this 
is  the  natural  Consequence  of  Liberty,  dividing  of  them  seems 
an  unnecessary  Distinction,  but  it  is  not  so  in  this  Case;  for 
there  are  are  Countries  where  Government  is  arbitrary,  which 
sometimes  carry  on  a  much  greater  Proportion  of  Trade  than 
Necessity  requires;  and  this  is  owing  to  the  personal  Virtues 
or  Policy  of  their  Princes;  who  either  from  Principles  of 
Justice  and  Humanit}^,  or  of  Self-interest,  give  that  Protec- 
tion to  Subjects  by  their  own  Power,  which  in  free  Countries, 
is  derived  from  Law,  and  this  whilst  it  continues  is  an  En- 
couragement for  Men  to  be  industrious,  and  engage  in  Trade ; 

61  but  as  their  Security  is  only  per  ||  sonal,  and  liable  to  and 
with  a  Prince's  Life,  and  Trade  cannot  soon  be  made  to  alter 
its  Course;  their  Views  and  Undertakings  will  be  less  exten- 
sive than  in  free  Countries,  where  Men  have  better  Security 
for  their  private  Rights,  and  the  Enjoyment  of  the  Fruits  of 
their  Labour,  than  the  mutable  Will  of  an  arbitrary  Prince; 
and  consequently  Trade  cannot  thrive  for  any  long  Tract  of 
Time,  so  well  under  the  one  as  the  other. 

IV.  Of  publick  Safety.  What  has  been  said  of  Liberty,  and 
the  Preservation  of  Mens  private  Rights  is  in  some  Measure 
applicable  to  publick  Safety :  For  they  are  all  Branches  of  one 
Tree,  and  contribute  to  produce  the  same  Fruit,  which  is 
private  Safety:  And  this  is  what  all  Men  have  some  Degree 
of  Confidence  in,  who  trade  further  than  Necessity  obliges 
them ;  which  they  cannot  have,  when  superior  Force  from  with- 
out, threatens  a  general  Ravage  and  Devastation;  any  more 
than  they  can  when  Tyranny  or  Anarchy  prevail  at  home. 

From  what  has  been  said  concerning  the  Motives  which 
induce  Men  to  trade,  I  think  this  Conclusion  may  be  made; 
that. 

The  Number  of  Traders  in  a  Country  is  governed  by  the 
Necessity  and  Encouragement  which  there  is  to  trade. 

As  I  have  now  mentioned  every  thing  concerning  the  Gov- 
ernment of  the  Rate  of  Interest,  which  at  present  seems  to  me 


The  j^atural  Eate  of  Interest  57 

material,  I  shall  conclude  with  a  brief  Repetition  of  my  own 
Sentiments  on  the  Matter,  which  are  as  follow : 

That  the  natural  Eate  of  Interest  is  governed  by  the  Profits 
of  Trade  to  Particulars. 

That  the  Profits  of  Trade  are  governed  by  the  Proportion 
which  the  Number  of  Traders  bears  to  the  Quantity  of 
Trade.  ||  62 

That  the  Number  of  Traders  is  governed  by  the  Necessity 
and  Encouragement  which  there  is  to  trade. 

This  is  the  Light  in  which  natural  Interest  appears  to  me; 
but  if  any  thing  can  be  offered  which  is  better  supported  by 
Facts,  I  shall  be  ready  to  alter  my  Opinion  whenever  it 
appears. 

FINIS. 


NOTES 

*  (page  11)  The  extracts  cited  contain  a  number  of  minor  verbal 
errors  as  well  as  numerous  inaccuracies  in  the  matter  of  punctu- 
ation, capitalization  and  paragraphing. 

^  (page  11)  "Several  essays  in  Political  Arithmetick:  The 
Titles  of  which  follow  in  the  Ensuing  Pages"   (London,  1699). 

'  (page  12)  "  Some  considerations  of  the  Consequences  of  the 
Lowering  of  Interest,  and  Raising  the  Value  of  Money.  In  a 
Letter  to  a  Member  of  Parliament"  (London,  1G92). 

The  citations  in  Massie's  text  are  to  be  found  in  the  above 
edition  of  Locke's  essay  as  follows:  2,  p.  8;  3,  pp.  10-11;  4,  p.  13; 
5,  pp.  17-18;  6,  p.  19;  7,  pp.  40-41;  8,  pp.  47-48;  9,  p.  48;  10,  pp. 
53-54;  11,  p.  61;  12,  pp.  70-71;  13,  pp.  71-73;  14,  p.  80;  15,  pp.  84-85; 
16,  pp.  105-106;  17,  p.  124. 

*  (page  20)  "Considerations  upon  a  Reduction  of  the  Land- 
Tax"  (London,  1749),  pp.  31,  51. 

^  (page  27)  The  Young  Pretender  was  defeated  at  Culloden  on 
April  16,  1746. 

^  (page  37)  "  Chronicon  Preciosum:  or,  an  Account  of  English 
Money,  the  Price  of  Corn,  and  Other  Commodities,  for  the  last 
600  years.  In  a  Letter  to  a  Student  in  the  University  of  Oxford  " 
(London,  1707).    A  second  edition  was  published  in  1745. 

^  (page  38)  "Political  Arithmetick"  (London,  1690),  pp.  85, 
112-113;  in  "Economic  Writings"  (ed.  Hull;  Cambridge,  1899), 
vol.  i,  pp.  297,  311. 

*  (page  40)  "  An  Historical  Account  of  English  Money,  from  the 
Conquest,  to  the  Present  Time;  including  those  of  Scotland,  from 
the  Union  of  the  two  Kingdoms  in  King  James  I.  The  second 
edition,  with  great  Additions  and  Improvements,  Tables  of  Gold 
and  Silver  Money,  and  Six  New  Cuts"  (London,  1745). 

^  (page  54)  "Observations  upon  the  United  Provinces  of  the 
Netherlands";  in  "The  Works  of  Sir  William  Temple,  Bar'." 
(Edinburgh,  1754),  vol.  i,  pp.  1-157. 


',iU 


THIS  BOOK  IS  DUE  ON  THE  LAST  DATE 
STAMPED  BELOW 

AN  INITIAL  FINE  OF  25  CENTS 

WILL  BE  ASSESSED  FOR  FAi.,ir,r  ^     ^^  ^  ^ 
THIS  BOOK  ON  THE  DATr  nn^  "^  ^°    RETURN 

OVERDUE  °''  "^"^  SEVENTH  DAY 


OCT    A  SR':^  ■" — 


:0APft'63yY 


f  r- 


~i«N-t-3-13Sr5^ 


.0'^^^ 


1359: 


tl^ 


.^T- 


iVltf.'^ 


YD  2034!i 


w,  >.. 


23675; 


r 


^v 


